Panera Bread: Reports Q3/2012 diluted EPS up 28 percent

For the thirty-nine weeks ended September 25, 2012, net income was 122 million USD or 4,14 USD per diluted share. These results compare to net income of 97 million USD or 3,24 USD per diluted share, for the thirty-nine weeks ended September 27, 2011 and represent a 28 percent year-over-year increase in diluted earnings per share.

Comparable Net Bakery-Cafe Sales Growth

In the third quarter fiscal 2012, Company-owned comparable net bakery-cafe sales increased 6,2 percent, franchise-operated comparable net bakery-cafe sales increased 5,5 percent and system-wide comparable net bakery-cafe sales increased 5,8 percent compared to the comparable period in fiscal 2011. The Company-owned comparable net bakery-cafe sales increase of 6,2 percent in the third quarter fiscal 2012 was comprised of year-over-year transaction growth of 0,6 percent and average check growth of 5,6 percent. Average check growth was comprised of retail price increases of approximately 3,0 percent and positive mix impact of approximately 2,6 percent.

Operating Margin: In the third quarter fiscal 2012, the Company generated operating margin improvement of approximately 80 basis points compared to the third quarter fiscal 2011. This increase was driven primarily by higher bakery-cafe margins, partially offset by lower margins from fresh dough and other product sales to franchisees. The increase in bakery-cafe margins was driven primarily by sales leverage, while the decline in margins from fresh dough and other product sales to franchisees resulted primarily from year-over-year wheat price inflation and higher year-over-year zero margin produce sales to franchisees.

New Unit Development and AWS: During the third quarter fiscal 2012, the Company opened 17 new bakery-cafes and its franchisees opened 19 new bakery-cafes. As a result, there were 1’625 bakery-cafes open system-wide as of September 25, 2012.

Fourth Quarter Fiscal 2012 Outlook

Diluted EPS Target: The Company is raising its target for fourth quarter fiscal 2012 earnings per diluted share to 1,72 USD to 1,74 USD from its prior targeted range of 1,66 USD to 1,70 USD. If the Company meets this target, diluted earnings per share would grow 31 percent to 33 percent in the fourth quarter fiscal 2012 versus 1,31 USD per diluted share in the fourth quarter fiscal 2011. The fourth quarter fiscal 2011 earnings per diluted share included a 5,0 million USD one-time legal settlement charge. Excluding this one-time charge, targeted fourth quarter fiscal 2012 diluted earnings per share growth would be 21 percent to 23 percent. The fourth quarter fiscal 2012 diluted earnings per share target includes the following key assumptions:

Comparable Net Bakery-Cafe Sales Growth: The range for the Company´s fourth quarter fiscal 2012 Company-owned comparable net bakery- cafe sales growth over the comparable period in fiscal 2011 is now targeted at 5,0 percent to 6,0 percent. The fourth quarter fiscal 2012 target assumes 1,0 percent to 1,5 percent transaction growth and average check growth of approximately 4,0 percent to 4,5 percent, consisting of a year-over-year price increase of approximately 2,5 percent and positive mix impact on check growth of 1,5 percent to 2,0 percent. Company-owned comparable bakery-cafe sales growth for the first twenty-seven days of the fourth quarter fiscal 2012 was 6,1 percent.

Operating Margin Target: In the fourth quarter fiscal 2012, the Company now anticipates its operating margin will improve by approximately 75 to 100 basis points on a year-over-year basis, reflecting higher than previously targeted comparable net bakery-cafe sales growth in the fourth quarter fiscal 2012.

Updated Full Year Fiscal 2012 Outlook

Diluted EPS Target: The Company is raising its target for fiscal 2012 earnings per diluted share to 5,86 USD to 5,88 USD from its prior targeted range of 5,72 USD to 5,78 USD. If the Company meets this target, diluted earnings per share would grow 29 percent in fiscal 2012 versus 4,55 USD per diluted share in fiscal 2011. The increase in the Company´s diluted earnings per share target reflects higher comparable net bakery-cafe sales growth and improved operating margins. Fiscal 2011 earnings per diluted share included a 5,0 million USD one-time legal settlement charge in the fourth quarter fiscal 2011. Excluding this one-time charge, targeted fiscal 2012 diluted earnings per share growth would be 26 percent. This full year fiscal 2012 diluted earnings per share target is based on the following key assumptions:

Comparable Net Bakery-Cafe Sales Growth: The range for the Company´s fiscal 2012 Company-owned comparable net bakery-cafe sales growth over the comparable period in fiscal 2011 is now targeted at 6,0 percent to 6,5 percent. The fiscal 2012 target assumes transaction growth of 1,0 percent to 1,5 percent and average check growth of approximately 5,0 percent on average year-over-year price increases of approximately 3,0 percent and positive mix impact of approximately 2,0 percent.

Operating Margin Improvement: For fiscal 2012, the Company is increasing its previous target for operating margin to 75 to 100 basis points favorable to fiscal 2011, reflecting higher than previously targeted comparable net bakery-cafe sales growth in fiscal 2012.

New Unit Development and AWS: The Company now expects to be at the high-end or slightly over the previously provided targeted range of 115 to 120 system-wide new unit openings in fiscal 2012. The average weekly net sales performance for new Company-owned units is now expected to be above the previously provided targeted range of 40’000 USD to 42’000 USD for fiscal 2012 primarily due to the favourable impact of a higher number of new units opened in urban areas during fiscal 2012.

Initial Full Year Fiscal 2013 Targets

The Company is initially targeting fiscal 2013 earnings per diluted share of 6,85 USD to 7,00 USD, up 17 percent to 19 percent, versus the midpoint of fiscal 2012 targeted earnings per diluted share. This range includes the favourable impact of the 53rd week in fiscal 2013. This full year fiscal 2013 diluted earnings per share target is based on the following key assumptions: Comparable Net Bakery-Cafe Sales Growth The Company is targeting Company-owned comparable net bakery-cafe sales growth to be in the range of 4,5 percent to 5,5 percent for fiscal 2013 versus the midpoint of fiscal 2012 targeted comparable net bakery-cafe sales growth.

Operating Margin Improvement: The Company´s fiscal 2013 EPS target assumes its fiscal 2013 operating margin range will be flat to 50 basis points of improvement as compared to the midpoint of fiscal 2012 targeted operating margin. This target includes a significant step up in investments to provide greater access for customers, increased operational capabilities and improvement to the Company´s core enterprise systems.

New Unit Development and AWS: The Company´s fiscal 2013 EPS target assumes approximately 115 to 120 system-wide new unit openings. The average weekly net sales performance for new Company-owned units is targeted at 40’000 USD to 42’000 USD.

Concluding Comments

Bill Moreton, President and Co-CEO, commented, «We are pleased to report 28 percent earnings growth in the third quarter driven by our 6,2 percent comparable store sales increase. These strong results are reflective of the continued investments we are making in the quality of our food, marketing and operations, which we believe are resulting in a better and differentiated customer experience». Ron Shaich, Chairman and Co-CEO added, «Building on our long-term strategy to drive competitive advantage, we are going to step up our level of investment to provide greater access for our customers, increase our operational capabilities and improve our core enterprise systems in 2013. We believe these initiatives, along with many other initiatives that are underway, will position Panera for even greater success well into the future».