Panera Bread Co.'s (PNRA) first-quarter 2013 adjusted earnings of $1.59 per share fell shy of the Zacks Consensus Estimate of $1.65 by 3.6% but increased 13.6% from the year-ago- earnings per share. On a reported basis, including the benefit from resolution of legal and tax matters, earnings were $1.64 per share, up 17% year over year. Earnings were driven by improved top-line and operating margins.
Quarter in Detail
The restaurant chain’s total revenue escalated 13% year over year to $561.8 million in the first quarter but lagged the Zacks Consensus Estimate of $568.0 million. Increases in all categories including company-owned bakery-cafe revenues, franchise royalties and sales of fresh dough to franchisees helped drive revenues in the quarter.
System-wide comparable net bakery-cafe sales in the quarter increased 3.3% driven by a 3.3% increase both at company-owned units and franchised-operated units. The comps fell short of the company’s guided range of 4%–5%. Muted growth in comps can be attributed to 2.4% decline in transaction in the quarter.
Comps were worst hit in the month of February with only 0.8% rise. Adverse weather throughout the United States in February and March particularly in the Midwest, which marred Panera’s St. Louis market, led to a 100 to 150 basis points of unfavorable impact on the quarter results.
The company’s operating margin increased 10 basis points backed by better margins on fresh dough and other product sales to franchisees as well as lower operating expenses.
Store Update
During the quarter, Panera opened 10 new company-owned bakery-cafes and 12 franchised bakery-cafes. For 2013, the company maintains its target of unveiling approximately 115–125 system-wide units.
Share Repurchase
In the first quarter, Panera bought back 0.12 million shares for $20 million, leaving $560 million under its existing $600 million repurchase authorization. However, the activity had minimal impact on earnings per share in the quarter.
New Sole CEO
Following the transition of co-CEO (chief operating officer) Bill Moreton to Executive Vice Chairman effective Aug 1, 2013, present chairman and co-CEO Ron Shaich will again serve as Panera's sole CEO.
Shaich is Panera's founder and has worked before as a sole-CEO from May 1994 to May 2010.
Outlook
Panera expects earnings to be in the range of $1.74–$1.78 per share for the second quarter of 2013, reflecting 16%–19% growth. The company anticipates second quarter company-owned comparable sales in the range of 4%–5%. Panera already announced that comps at company-owned units in the first 27 days of the second quarter fiscal 2013 were up approximately 5.0%. It is targeting operating margin improvement of 25 to 75 basis points.