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Fourth quarter 2007 diluted EPS target set at $0.53 to $0.59
Initial target for fiscal 2008 diluted EPS growth established at 10% to 20%
Panera Bread Company (NASDAQ:PNRA) today reported net income of $12 million, or $0.37 per diluted share, for the third quarter ended September 25, 2007, compared to net income of $11 million, or $0.34 per diluted share, for the third quarter ended September 26, 2006. For the thirty-nine weeks ended September 25, 2007, net income was $40 million, or $1.23 per diluted share, compared to $40 million, or $1.25 per diluted share, for the thirty-nine weeks ended September 26, 2006.
The Company's third 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), and reflects an adjustment to the third quarter revenues released on October 3, 2007:
For the 13 Weeks Ended Percentage
September 25, 2007 September 26, 2006 Change
Total revenue $273,213 $204,954 33%
Net income $11,943 $10,879 10%
Diluted earnings per share $0.37 $0.34 9%
Shares used in diluted EPS 32,163 31,961
For the 39 Weeks Ended Percentage
September 25, 2007 September 26, 2006 Change
Total revenue $765,847 $596,059 28%
Net income $39,622 $39,943 -1%
Diluted earnings per share $1.23 $1.25 -2%
Shares used in diluted EPS 32,210 32,012
Third Quarter 2007 Key Metrics & Business Review
During the third quarter of 2007, system-wide comparable bakery-cafe sales increased 2.6% (3.4% Company-owned and 2.1% franchise-operated). System-wide average weekly sales decreased by 0.1% to $38,051 ($37,136 Company-owned and $38,711 franchise-operated), while system-wide operating weeks in the third quarter totaled 14,931 (6,254 Company-owned and 8,677 franchise-operated).
During the third quarter of 2007, the Company opened 35 new bakery-cafes system-wide (19 Company-owned and 16 franchise-operated) and closed two bakery-cafes system-wide (one Company-owned and one franchise-operated).
As of September 25, 2007, there were 1,168 bakery-cafes open system-wide. The breakdown of bakery-cafes between Company-owned and franchise-operated is as follows:
Company-owned Franchise-operated Total System
Bakery-cafes as of
June 26, 2007 475 660 1,135
Bakery-cafes opened 19 16 35
Bakery-cafes closed (1) (1) (2)
Bakery-cafes as of
September 25, 2007 493 675 1,168
During the third quarter of 2007, earnings per diluted share were $0.37 compared to $0.34 per diluted share in the third quarter of 2006. Panera experienced margin contraction in the third quarter of 2007 resulting from: first, a mix shift both away from soups and sandwiches to higher food cost salads and away from self-manufactured bread and bagels, secondly, product ingredient costs which rose more rapidly than prices, and thirdly, labor costs which rose more rapidly than sales as the Company invested additional labor at lunch to improve the customer experience. Also included in the Company's third quarter 2007 results was a tax benefit of $0.05 per diluted share reflecting the resolution of a certain tax matter.
Fourth Quarter 2007 Business Outlook
The Company is today setting an earnings per diluted share target for the fourth quarter of 2007 of $0.53 to $0.59. The fourth quarter 2007 target assumes system-wide comparable bakery-cafe sales growth of 1.0% to 3.5% (including the price increase of approximately 2.5% which the Company will be taking on November 14, 2007) and system-wide average weekly sales of $39,700 to $40,700. 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 also today projecting that system-wide comparable bakery-cafe sales growth for the four weeks ended October 23, 2007 will be 0.3% to 0.6%. Additionally, bakery-cafe openings are forecasted to be 60 to 65 system-wide in the fourth quarter (39 to 41 Company-owned and 21 to 24 franchise-operated), resulting in expected system-wide operating weeks in the fourth quarter of 2007 of 15,450 to 15,500.
2008 Business Outlook
The Company today is establishing its initial growth target for fiscal 2008 earnings per diluted share at 10% to 20%. The assumptions on key metrics underlying the 2008 target are new bakery-cafe development of 160 to 175, approximately the same as in fiscal 2007, system-wide comparable bakery-cafe sales growth of 1% to 4%, system-wide average weekly sales of $38,400 to $39,600, and system-wide operating weeks of 68,000 to 68,500.
Chairman and Chief Executive Officer Ron Shaich commented: "Despite operating in a very uncertain consumer and cost environment, our concept remains strong as evidenced by our industry leading customer satisfaction ratings, high unit volumes and resulting strong bakery-cafe return on investment. These factors speak to our potential for future growth. Having said that we also recognize the challenges experienced in the past year. As a result, we have charted a clear plan to overcome existing margin compression while maintaining transactions and we've begun to make some encouraging progress. We are looking forward to making further progress and returning to our record of strong earnings growth."
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