• Second quarter 2007 revenues increased 28% from second quarter 2006 to $253 million
• 39 new bakery-cafes opened in the quarter and system-wide bakery-cafes open of 1,135
• Third quarter 2007 diluted EPS target set at $0.32 to $0.38
• Second half 2007 diluted EPS target set at $0.86 to $1.02
• System-wide comparable bakery-cafe sales growth for the four weeks ended July 24, 2007 expected to be 3.6% to 3.9%
Panera Bread Company (NASDAQ:PNRA) today reported net income of $13 million, or $0.39 per diluted share, for the second quarter ended June 26, 2007, compared to net income of $14 million, or $0.44 per diluted share, for the second quarter ended June 27, 2006. For the twenty-six weeks ended June 26, 2007, net income decreased to $28 million, or $0.86 per diluted share, compared to $29 million, or $0.91 per diluted share, for the twenty-six weeks ended June 27, 2006.
The Company's second quarter and year-to-date fiscal 2007 consolidated statements of operations and margin analysis are attached as Schedule I. The following tables set forth, for the periods indicated, certain items included in the Company's consolidated statements of operations (in thousands, except per share data and percentages):
For the 13 Weeks Ended Percentage
June 26, 2007 June 27, 2006 Change
Total revenue $252,959 $197,135 28%
Net income $12,635 $14,052 -10%
Diluted earnings per share $0.39 $0.44 -11%
Shares used in diluted EPS 32,250 32,042
For the 26 Weeks Ended Percentage
June 26, 2007 June 27, 2006 Change
Total revenue $492,634 $391,106 26%
Net income $27,679 $29,065 -5%
Diluted earnings per share $0.86 $0.91 -5%
Shares used in diluted EPS 32,225 32,010
Second Quarter 2007 Key Metrics & Business Review
During the second quarter of 2007, system-wide comparable bakery-cafe sales increased 2.1% (1.7% Company-owned and 2.3% franchise-operated). System-wide average weekly sales decreased by 0.9% to $38,273 ($37,050 Company-owned and $39,056 franchise-operated), while system-wide operating weeks in the second quarter totaled 14,500 (5,658 Company-owned and 8,842 franchise-operated).
During the second quarter of 2007, the Company opened 39 new bakery-cafes system-wide (17 Company-owned and 22 franchise-operated); acquired 32 bakery- cafes from franchisees; sold one bakery-cafe to a franchisee; and closed five bakery-cafes system-wide (three Company-owned and two franchise-operated).
As of June 26, 2007, there were 1,135 bakery-cafes open system-wide. The breakdown of bakery-cafes between Company-owned and franchise-operated is as follows:
Company- Franchise- Total
owned operated System
Bakery-cafes as of March 27, 2007 430 671 1,101
Bakery-cafes opened 17 22 39
Bakery-cafes closed (3) (2) (5)
Bakery-cafe sold to franchisee (1) 1 -
Bakery-cafes acquired from
franchisees 32 (32) -
Bakery-cafes as of June 26, 2007 475 660 1,135
During the second quarter of 2007, earnings per diluted share were $0.39 in comparison to $0.44 per diluted share in the second quarter of 2006 primarily as a result of: a mix shift from self-manufactured bread and bagels towards outsourced soufflés, scones and muffins; a mix shift within the bakery-cafe menu from soups and sandwiches to higher food cost salads; input prices outpacing product price increases; deleverage from lower bakery-cafe sales increases against fixed costs; and incremental labor investment in the evening day-part as compared to the prior year. Also included in the Company's second quarter 2007 results was a one-time tax benefit of $0.02 per diluted share and a gain of $0.01 per diluted share on the sale of a Company bakery-cafe to a new franchisee, partially offset by a charge of $0.02 per diluted share from the second quarter 32 bakery-cafe acquisition relating to the termination of franchise agreements for certain bakery-cafes that operated at a royalty rate lower than the current market royalty rates.
2007 Business Outlook
The Company is today setting an earnings per diluted share target for the third quarter of 2007 of $0.32 to $0.38. Actual earnings per share results for the third quarter ended September 26, 2006 were $0.34 per diluted share. The third quarter 2007 target assumes system-wide comparable bakery-cafe sales growth of 2.5% to 4.5% and system-wide average weekly sales of $37,900 to $38,900. Bakery-cafe openings are forecasted to be 35 system-wide (21 Company- owned and 14 franchise-operated), compared to 38 system-wide (17 Company-owned and 21 franchise-operated) in the third quarter of 2006, resulting in expected system-wide operating weeks in the third quarter of 2007 of 14,950 to 15,000.
Based upon 27 days of actual sales data for Company-owned bakery-cafes and 21 days of actual sales data for franchise-operated bakery-cafes, the Company is today projecting that system-wide comparable bakery-cafe sales growth for the four weeks ended July 24, 2007 will be 3.6% to 3.9%.
Based on continued margin pressures the Company is experiencing, the Company today is setting its 2007 earnings per diluted share target for the remainder of the year at $0.86 to $1.02. This second half of 2007 target assumes system-wide comparable bakery-cafe sales growth of 2.25% to 4.75%, system-wide average weekly sales of $38,800 to $39,900, and system-wide operating weeks of 30,650 to 30,750. Bakery-cafe openings are expected to be 110 to 124 (59 to 66 Company-owned and 51 to 58 franchise-operated).
Chairman and Chief Executive Officer Ron Shaich commented, "While second quarter results are somewhat disappointing, we are pleased to see some of our investments in the bakery-cafes pay off with higher comp store sales increases. We look forward to continuing our positive sales trends while at the same time addressing the margin issues currently impacting our results."
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