St. Louis / MO. (pbc) Panera Bread Company reported net income of 48 million USD, or 1.82 USD per diluted share, for the thirteen weeks ended December 30, 2014. Diluted EPS for fiscal Q4/2014 was up two percent versus fiscal Q4/2013, excluding a goodwill impairment charge recorded in fiscal Q4/2014 of 2.1 million USD, or 0.05 USD per diluted share, and excluding the estimated 0.13 USD per diluted share benefit in fiscal Q4/2013 from the additional operating week. For the fourteen weeks ended December 31, 2013, the Company reported net income of 54 million USD, or 1.96 USD per diluted share. For the fifty-two weeks ended December 30, 2014, net income was 179 million USD, or 6.64 USD per diluted share. Diluted EPS for full year fiscal 2014 was up 0.03 USD per diluted share, compared to full year fiscal 2013, when excluding certain items for both full year fiscal 2014 and fiscal 2013. For the fifty-three weeks ended December 31, 2013, the Company reported net income of 196 million USD, or 6.81 USD per diluted share.
Comparable Net Bakery-Cafe Sales Growth
In fiscal Q4/2014, on a calendar basis, Company-owned comparable net bakery-cafe sales increased 3.3 percent, franchise-operated comparable net bakery-cafe sales increased 2.7 percent, and system-wide comparable net bakery-cafe sales increased 3.0 percent compared to the same period in fiscal 2013. The Company-owned comparable net bakery-cafe sales increase of 3.3 percent on a calendar basis in fiscal Q4/2014 was comprised of year-over-year transaction growth of 1.3 percent and average check growth of 2.0 percent. For the full year fiscal 2014, on a calendar basis, Company-owned comparable net bakery-cafe sales increased 1.4 percent, franchise-operated comparable net bakery-cafe sales increased 0.9 percent, and system-wide comparable net bakery-cafe sales increased 1.1 percent compared to fiscal 2013. 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-cafes sales for fiscal Q4/2014 decreased 4.0 percent and for full year fiscal 2014 decreased 0.3 percent.
Operating Margin
In fiscal Q4/2014, the Company experienced a decline in operating margin of approximately 140 basis points compared to fiscal Q4/2013. This decline was primarily the result of food cost inflation, as well as the cost of initiatives designed to make Panera a better competitive alternative and to enable expanded growth through Panera 2.0; innovation in operations, food and marketing; delivery hubs; and our investments in technology to create the capabilities needed to support these initiatives.
New Bakery-Cafe Development and AWS
During fiscal Q4/2014, the Company opened 26 new bakery-cafes and its franchisees opened 14 new bakery-cafes. For the full year fiscal 2014, the Company and its franchisees opened 114 new bakery-cafes (65 Company-owned and 49 franchise-operated). As a result, there were 1’880 bakery-cafes open system-wide as of December 30, 2014. Average weekly sales (AWS) for Company-owned «Class of 2014» bakery-cafes for full year fiscal 2014 was 44’986 USD compared to 44’084 USD in full year fiscal 2013. AWS for franchise-operated «Class of 2014» bakery-cafes for full year fiscal 2014 was 48’881 USD compared to 46’948 USD for full year fiscal 2013. Non-traditional bakery-cafes refers to a range of alternate formats that the Company believes will allow it to more deeply penetrate existing and new territories with a range of different formats.
Use of Capital
During fiscal Q4/2014, the Company repurchased 149’877 shares at an average price of 166.77 USD per share for an aggregate purchase price of approximately 25.0 million USD. During full year fiscal 2014, the Company repurchased a total of 941’878 shares at an average price of 163.62 USD per share for an aggregate purchase price of approximately 154.1 million USD. The Company has approximately 533.4 million USD available under the current 600 million USD repurchase authorization.
Full Year Fiscal 2015 Outlook
Diluted EPS: The number of moving pieces in fiscal 2015 makes it difficult to provide precise guidance. The Company is targeting full year fiscal 2015 diluted earnings per share growth of flat to down mid- to high-single digits when compared to full year fiscal 2014. The full year fiscal 2015 diluted earnings per share target range 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 for fiscal 2015 of 2.0 percent to 3.5 percent. The Company announced today that Company-owned comparable net bakery-cafe sales in the first 42 days of fiscal Q1 2015 were up approximately 2.8 percent.
Operating Margin: The Company´s fiscal 2015 diluted earnings per share target range assumes operating margin will be down 100 to 175 basis points when compared to fiscal 2014. The anticipated decline in year-over-year margin reflects the cost of previously mentioned initiatives designed to make Panera a better competitive alternative and to enable expanded growth, along with higher medical costs due to the Affordable Care Act (ACA) and higher labor costs due to the impact of increases in minimum wage rates.
New Bakery-Cafe Development and AWS: The Company´s fiscal 2015 new bakery-cafe target is 105 to 115 system-wide bakery-cafe openings and the average weekly net sales performance target for new Company-owned bakery-cafes is 43’000 USD to 45’000 USD.
Concluding Comment
Ron Shaich, Chairman and CEO, commented, «Our transaction growth of 1.3 percent in Q4 – our third straight quarter of transaction growth and second straight quarter of growth above one percent – speaks to the progress we continue to make in our efforts to bend the arc of transaction and comp growth in our core business. Our sharpened focus on operations, food innovation and marketing innovation continues to drive that momentum». Shaich continued, «We also are beginning to see initial results from the structural enhancements we have been rolling out throughout 2014. These enhancements, including Panera 2.0, operational integrity, and delivery hubs, are intended to upgrade our guest experience, improve throughput and accuracy, and allow us to grow, especially in the large order delivery business. We continue to expect the rollout of these enhancements to adversely impact our 2015 results, but we believe they offer the potential to elevate Panera´s competitive position and broaden our growth opportunities, which we believe, in turn, will lead to expanded medium- and long-term earnings growth».
