Panera Bread: Reports Q4/2015 Financial Results

St. Louis / MO. (pbc) Panera Bread Company reported financial results for fiscal Q4 2015 and full year fiscal 2015. Highlights: Q4/2015 Company-owned comparable net bakery-cafe sales up 3.6 percent; Q1/2016 (first 41 days) Company-owned comparable net bakery-cafe sales up 6.4 percent; Q4/2015 EPS growth of 1 percent, excluding one-time items; FY/2016 EPS growth target set at up 2 percent to 5 percent, excluding one-time items; 119 Company bakery-cafes converted to Panera 2.0 during Q4/2015, bringing total to 410 units.

Ron Shaich, Chairman and CEO, commented, “Our strategic plan is working. Our comps of 3.6% in Q4 2015 and 6.4% in the first 41 days of Q1 2016 are leading indicators of the impact our initiatives are having. Further, we are confident that our results will continue to strengthen as the startup and transition costs associated with our initiatives begin to crest and our sales continue to grow. We now expect the EPS growth we saw in Q4 2015 will improve in 2016 and further accelerate in 2017. Today, we are confident we are on a path to return to sustained double-digit earnings growth.”

Fiscal Q4/2015 and Full Year Fiscal 2015 Results

Reported net income was 43 million USD, or 1.74 USD per diluted share, for fiscal Q4 2015. The fiscal Q4 2015 results compare to reported net income of 48 million USD, or 1.82 USD per diluted share, for fiscal Q4 2014. Excluding one-time items in both quarters (see table below), diluted EPS was 1.88 USD for fiscal Q4 2015 and 1.87 USD for fiscal Q4 2014, or up 1%.

Reported net income was 149 million USD, or 5.79 USD per diluted share, for full year fiscal 2015. The full year fiscal 2015 results compare to reported net income of 179 million USD, or 6.64 USD per diluted share, for full year fiscal 2014. Excluding one-time items in both fiscal years, diluted EPS was 6.21 USD for full year fiscal 2015 and 6.53 USD for full year fiscal 2014, or down 5%.

Comparable Net Bakery-Cafe Sales Growth

In fiscal Q4 2015, Company-owned comparable net bakery-cafe sales increased 3.6%, franchiseoperated comparable net bakery-cafe sales increased 1.1%, and system-wide comparable net bakery-cafe sales increased 2.3% compared to the same period in fiscal 2014. Two-year Companyowned comparable net bakery-cafe sales increased 6.9%, two-year franchise-operated comparable net bakery-cafe sales increased 3.8%, and two-year system-wide comparable net bakery-cafe sales increased 5.3%.

The Company-owned comparable net bakery-cafe sales increase of 3.6% in fiscal Q4 2015 was comprised of year-over-year transaction growth of 1.1% and average check growth of 2.5%. For full year fiscal 2015, Company-owned comparable net bakery-cafe sales increased 3.0%, franchise-operated comparable net bakery-cafe sales increased 1.0%, and system-wide comparable net bakery-cafe sales increased 1.9% compared to fiscal 2014.

Operating Margin

Operating margin for fiscal Q4 2015 declined approximately 60 basis points versus fiscal Q4 2014, excluding charges related to the Company’s refranchising initiative. This decline was primarily the result of structural wage increases and costs related to the startup and transition expenses associated with our strategic initiatives. As reported, operating margin for fiscal Q4 2015 declined approximately 140 basis points versus fiscal Q4 2014. Operating margin for full year fiscal 2015 declined approximately 130 basis points versus full year fiscal 2014, excluding charges related to the Company’s refranchising initiative. Operating margin for full year fiscal 2015 declined approximately 190 basis points versus full year fiscal 2014.

New Bakery-Cafe Development and AWS

During fiscal Q4 2015, the Company opened 18 new bakery-cafes and its franchisees opened 15 new bakery-cafes. For full year fiscal 2015, the Company and its franchisees opened 112 new bakery-cafes (57 Company-owned and 55 franchise-operated). As a result, there were 1’972 bakery-cafes open system-wide as of December 29, 2015. Average weekly sales (“AWS”) for Company-owned “Class of 2015” bakery-cafes for full year fiscal 2015 was 45’357 USD. AWS for franchise-operated “Class of 2015” bakery-cafes for full year fiscal 2015 was 48’711 USD.

Initial Full Year Fiscal 2016 Outlook

Diluted EPS: The Company is targeting full year fiscal 2016 diluted earnings per share growth of 2% to 5% when compared to full year fiscal 2015. The full year fiscal 2016 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 2016 of 3.5% to 4.5%. The Company announced today that Company-owned comparable net bakery-cafe sales in the first 41 days of fiscal Q1 2016 were up 6.4%. Comparable net bakerycafe sales in the first 41 days benefited from the fact that the Company took an earlier price increase in fiscal Q1 2016 than in fiscal Q1 2015 to better align with structural wage increases.

Operating Margin: The Company’s fiscal 2016 diluted earnings per share target range assumes operating margin will be down 50 to 100 basis points when compared to fiscal 2015 which reflects startup and transition costs associated with our initiatives, excluding the impact of one-time charges.

New Bakery-Cafe Development and AWS: The Company’s fiscal 2016 new bakery-cafe target is 90 to 100 system-wide bakery-cafe openings and the average weekly net sales performance target for new Company-owned bakery-cafes is 45’000 USD to 47’000 USD.