St. Louis / MO. (pbc) Panera Bread Company reported net income of 39 million USD, or 1.46 USD per diluted share, for fiscal Q3/2014. These results compare to net income of 43 million USD, or 1.48 USD per diluted share, for fiscal Q3/2013. The fiscal Q3/2014 results include favorable tax adjustments of 2.3 million USD, or 0.08 USD per diluted share, which were anticipated in the diluted EPS target for fiscal Q3/2014. The fiscal Q3/2013 results included the impact of favorable tax adjustments of 3.8 million USD, or 0.13 USD per diluted share. Excluding these tax adjustments in fiscal Q3/2014 and fiscal Q3/2013, diluted EPS for fiscal Q3/2014 was up two percent versus fiscal Q3/2013 on a comparable basis. Highlights:
- Q3/2014 Company-owned comparable net bakery-cafe sales up 2.1 percent
- Q3/2014 Company-owned comparable net bakery-cafe transactions up 1.4 percent
- Q4/2014 (first 27 days) Company-owned comparable net bakery-cafe sales up 3.3 percent
- FY-2014 EPS target range adjusted to 6.60 USD to 6.70 USD
For the thirty-nine weeks ended September 30, 2014, net income was 131 million USD, or 4.83 USD per diluted share. These results compare to net income of 142 million USD, or 4.86 USD per diluted share, for the thirty-nine weeks ended September 24, 2013.
Comparable Net Bakery-Cafe Sales Growth
In fiscal Q3/2014, on a calendar basis, Company-owned comparable net bakery-cafe sales increased 2.1 percent, franchise-operated comparable net bakery-cafe sales increased 0.7 percent, and system-wide comparable net bakery-cafe sales increased 1.4 percent compared to the same period in fiscal 2013. The Company-owned comparable net bakery-cafe sales increase of 2.1 percent on a calendar basis in fiscal Q3/2014 was comprised of year-over-year transaction growth of 1.4 percent and average check growth of 0.7 percent. For the first 27 days of fiscal Q4 2014, Company-owned comparable net bakery-cafe sales growth on a calendar basis was approximately 3.3 percent. The Company believes that the calendar basis comparison better reflects the performance of the business as it eliminates the impact of the extra week in fiscal 2013 and compares consistent calendar weeks. Note that on a fiscal basis, Company-owned comparable net bakery-cafe sales for fiscal Q3/2014 increased 2.4 percent.
In fiscal Q3/2014, the Company experienced a decline in operating margin of approximately 200 basis points compared to fiscal Q3/2013. This decline was primarily the result of the cost of initiatives to improve the Company´s core operations and throughput, and investments in food and marketing innovation, as well as food cost inflation.
New Bakery-Cafe Development and AWS
During fiscal Q3/2014, the Company opened 13 new bakery-cafes and its franchisees opened 15 new bakery-cafes. As a result, there were 1’845 bakery-cafes open system-wide as of September 30, 2014. New Bakery-Cafe Development and AWS During fiscal Q3/2014, the Company opened 13 new bakery-cafes and its franchisees opened 15 new bakery-cafes. As a result, there were 1’845 bakery-cafes open system-wide as of September 30, 2014.
Use of Capital
During fiscal Q3/2014, the Company repurchased 195’559 shares at an average price of 148.95 USD per share for an aggregate purchase amount of approximately 29 million USD. The fiscal Q3/2014 share repurchases had a nominal impact on the Company´s fiscal Q3/2014 earnings per diluted share. The Company has approximately 559 million USD remaining under the current 600 million USD repurchase authorization as of fiscal Q3/2014.
Full Year Fiscal 2014 Outlook
Diluted EPS Target: The Company is adjusting its target range for fiscal 2014 earnings per diluted share to 6.60 USD to 6.70 USD. This full year fiscal 2014 diluted earnings per share target range is based on the following key assumptions:
Comparable Net Bakery-Cafe Sales Growth: The Company is adjusting its targeted range for fiscal 2014 Company-owned comparable net bakery-cafe sales growth to 1.0 percent to 1.5 percent on a calendar basis.
Operating Margin: For fiscal 2014, the Company now expects operating margin will be down 200 to 225 basis points when compared to fiscal 2013.
New Bakery-Cafe Development and AWS: The Company continues to expect 115 to 125 system-wide new bakery-cafe openings in fiscal 2014 and is maintaining its average weekly net sales performance target for new Company-owned bakery-cafes of 41’000 USD to 43’000 USD for fiscal 2014.
Ron Shaich, Chairman and CEO, commented, «The fact that we had 1.4 percent transaction growth in Q3, the highest since Q1 2012, speaks to the progress we have made in bending the arc on transaction growth in our core cafe business. Our initiatives to improve our core operations and thus increase throughput, along with food innovation and marketing innovation, are clearly having an impact».
Shaich continued, «In Q4 we are also beginning the rollout of a number of structural enhancements that have been under development for the last year or more. These enhancements include Panera 2.0, operational integrity, delivery hubs, and technological capabilities. They are intended to upgrade our guest experience, improve throughput and accuracy, and allow us to take market share in the large order delivery business. While we expect the rollout of these enhancements will have an adverse impact on our 2015 results, we believe they offer the potential to elevate Panera´s competitive position and broaden our growth opportunities which will, in turn, lead to expanded medium- and long-term earnings growth».