Panera Bread Reports Q1 EPS of $0.82, Up 44% Over Q1 2009, on a 10.0% Company-Owned Comparable Bakery-Cafe Sales Increase
2010-04-28
Panera Bread Company (NASDAQ: PNRA) today reported net income of $26 million, or $0.82 per diluted share, for the 13 weeks of the first quarter ended March 30, 2010.
HIGHLIGHTS
-- March 2010 Company-owned comparable bakery-cafe sales up 12.7%
-- April 2010 (27 days to date) Company-owned comparable bakery-cafe
sales up 10.3%
-- April 2010 (27 days to date) Franchise-operated comparable bakery-cafe
sales up 10.4%
-- Q1 2010 operating margin up 260 bps over Q1 2009
-- Q2 2010 EPS target at $0.81 to $0.83 (up 25% to 28% versus Q2 2009)
-- FY 2010 EPS target at $3.40 to $3.44 (up 22% to 24% versus FY 2009)
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These results include no impact from share repurchases under the Company's $600 million share repurchase approval because the Company did not repurchase shares during the first quarter of fiscal 2010. The first quarter of fiscal 2010 results compare to net income of $17 million, or $0.57 per diluted share, for the 13 weeks of the first quarter ended March 31, 2009, and represent a 44% year-over-year increase in diluted earnings per share. This 44% year-over-year increase in the first quarter of fiscal 2010 diluted EPS comes on top of a 39% increase in year-over-year diluted EPS in the first quarter of fiscal 2009.The Company's fiscal first quarter 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
-------------------------
March 30, March 31, Percentage
2010 2009 Change
------------ ------------ -----------
Total revenue $ 364,210 $ 320,709 14%
Net income $ 25,845 $ 17,432 48%
Diluted earnings per share $ 0.82 $ 0.57 44%
Shares used in diluted EPS 31,521 30,737
First Quarter Fiscal 2010 Results and Business Review
Comparable Bakery-Cafe Sales Growth
Company-owned comparable bakery-cafe sales in the first quarter of fiscal 2010 increased 10.0% versus the comparable period in fiscal 2009. Company-owned comparable bakery-cafe sales increased 9.5%, 8.1%, and 12.7% in the fiscal 2010 monthly periods of January, February and March, respectively, versus the comparable periods in fiscal 2009. Franchise-operated comparable bakery-cafe sales increased 9.2% in the first quarter of fiscal 2010 versus the comparable period in fiscal 2009 (9.3% in January, 6.9% in February and 12.1% in March). As a result, system-wide comparable bakery-cafe sales increased 9.5% in the first quarter of fiscal 2010 versus the comparable period in fiscal 2009 (9.4% in January, 7.4% in February and 12.4% in March).
The Company-owned comparable bakery-cafe sales increase of 10.0% in the first quarter of fiscal 2010 included the following year-over-year components: transaction growth of 3.5% and average check growth of 6.5%. Average check growth in turn was comprised of retail price increases of approximately 2.0% and mix impact of approximately 4.5%. A schedule of comparable bakery-cafe sales information is attached as Schedule III.
Operating Margin Improvement
In the first quarter of fiscal 2010, the Company generated operating margin improvement of approximately 260 basis points compared to the first quarter of fiscal 2009, driven primarily by leverage from comparable bakery-cafe sales increases. This is the eighth straight quarter of operating margin expansion of 100 basis points or greater.
New Unit AWS and Development
In the first quarter of fiscal 2010, average weekly sales ("AWS") for Company-owned new units was $56,113 compared to $41,922 in the first quarter of fiscal 2009. A schedule of the Company's first quarter fiscal 2010 AWS is attached as Schedule II.
During the first quarter of fiscal 2010, the Company and its franchisees opened eight new bakery-cafes system-wide, resulting in 1,388 bakery-cafes open system-wide as of March 30, 2010. The breakdown of Company-owned and franchise-operated bakery-cafes are as follows:
Franchise-
Company-owned operated Total System
-------------- -------------- --------------
Bakery-cafes as of
December 29, 2009 585 795 1,380
Bakery-cafes opened 3 5 8
Bakery-cafes closed - - -
-------------- -------------- --------------
Bakery-cafes as of
March 30, 2010 588 800 1,388
============== ============== ==============
Second Quarter 2010 Outlook
Second Quarter Fiscal 2010 Targets
Diluted EPS Target
For the second quarter of fiscal 2010, the Company is targeting earnings per diluted share of $0.81 to $0.83 versus $0.65 per diluted share in the second quarter of fiscal 2009. If the Company meets this target, diluted earnings per share will grow 25% to 28% in the second quarter of fiscal 2010 versus the comparable period in fiscal 2009. If the Company is able to deliver 25% to 28% diluted earnings per share growth in the second quarter of fiscal 2010, this will be on top of 25% year-over-year diluted earnings per share growth in the second quarter of fiscal 2009.
This second quarter of fiscal 2010 diluted earnings per share target includes the following key assumptions:
Comparable Bakery-Cafe Sales Growth
The Company's second quarter fiscal 2010 Company-owned comparable bakery-cafe sales growth is targeted at 8.5% to 9.5% versus the comparable period in fiscal 2009. The assumptions underlying this comparable bakery-cafe sales growth target for the second quarter are transaction growth of approximately 2.0% to 3.0% and average check growth of approximately 6.5%, with average check growth consisting of approximately 2.5% price and 3.5% to 4.5% mix impact on average check.
The Company announced today Company-owned comparable bakery-cafe sales in the first twenty-seven days of the second quarter of fiscal 2010 were up approximately 10.3% versus the comparable period in fiscal 2009, while franchise-operated comparable bakery-cafe sales were up approximately 10.4% during the same period.
Operating Margin Improvement
In the second quarter of fiscal 2010, the Company is targeting 125 to 175 basis points of improvement in operating margin.
New Unit AWS and Development
The Company is targeting approximately 14 to 16 system-wide new unit openings in the second quarter of fiscal 2010 with average weekly sales for Company-owned new units consistent with its full year target of $36,000 to $38,000.
Full Year Fiscal 2010 Targets
Confirming Full Year Fiscal 2010 Targets
Diluted EPS Target
The Company is reaffirming its target earnings per diluted share of $3.40 to $3.44 announced on April 20, 2010. If the Company meets its target, it would generate diluted earnings per share growth of 22% to 24% in fiscal 2010. This is an increase from the Company's prior full year fiscal 2010 earnings per diluted share target of $3.26 to $3.34. This increase in the fiscal 2010 target is based on the Company's greater confidence in its expectations for the strength of Company-owned comparable bakery-cafe sales growth.
The fiscal 2010 diluted earnings per share target assumes the following key assumptions:
Comparable Bakery-Cafe Sales Growth
The Company's fiscal 2010 target assumes Company-owned comparable bakery-cafe sales growth of 6.5% to 7.5% versus fiscal 2009. This target assumes transaction growth of between 1.5% and 2.5% and average check growth of approximately 5%.
Operating Margin Improvement
The Company is now targeting approximately 100 to 150 basis points of improvement in operating margin for fiscal 2010.
New Unit AWS and Development
The Company continues to target approximately 80 to 90 system-wide new unit openings for fiscal 2010 with average weekly sales for Company-owned new units of $36,000 to $38,000.
Concluding Comment
Chairman and Chief Executive Officer Ron Shaich commented, "Our 10.0% Company-owned comparable bakery-cafe sales in Q1 2010, fueled by 12.7% comps in March, drove EPS growth of 44% in Q1 2010. Importantly, this comes on top of a 39% increase in EPS in Q1 2009. Taken together, these results speak to the strength of our concept and the validity of the strategy we've executed over the past few years to invest in our business for the benefit of our guests despite the recession."
Shaich continued, "The 10.3% comparable bakery-cafe sales we generated in the first 27 days of Q2 (April fiscal period) gives us the confidence to target Q2 EPS up 25% to 28% and full year EPS up 22% to 24%."
Shaich added, "Tomorrow will be the 71st consecutive Earnings Call I have hosted as the CEO of our Company. As we announced last year, I will become Executive Chairman and Bill Moreton, our co-COO, will become our CEO on May 13, 2010. As I look back on the nearly 30 years since I co-founded this Company, I am pleased that we've been able to deliver for those shareholders who believed in our vision. I am pleased that our long-term investors have been rewarded with the strongest stock performance of any public restaurant company when measured over the last decade and the second best stock performance of any consumer discretionary company when measured over that same decade. As well, I have a deep sense of pride that we've been able to create a company that has enriched the lives of our team members and improved the quality of life in the almost 1,400 communities in which we operate. The fact that our brand now generates in excess of $2.8 billion in system-wide sales and is today the 8th largest publicly held restaurant company in the country (as measured by market cap) confirms our core belief that ever-increasing numbers of people will seek out artisan quality bread and food served in an engaging environment by people who care. Indeed, the 6 million customers Panera serves system-wide each week are a testament to the power of our three decade long commitment to build America's premier specialty food brand."
Shaich concluded, "As I look to the future, I am confident that consumers will continue to respond to Panera and the quality of its food, its environment and its people and believe that we have in place the concept, the strategy and the leadership to deliver extraordinary customer satisfaction, competitive advantage and sustained earnings growth well into the future."
Schedule I
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share amounts)
For the 13 Weeks Ended
March 30, March 31,
2010 2009
----------- -----------
Revenues:
Bakery-cafe sales $ 312,500 $ 272,882
Franchise royalties and fees 20,863 18,627
Fresh dough sales to franchisees 30,847 29,200
----------- -----------
Total revenue 364,210 320,709
Costs and expenses:
Bakery-cafe expenses:
Cost of food and paper products $ 90,311 $ 80,991
Labor 100,682 89,541
Occupancy 24,389 23,272
Other operating expenses 39,535 36,180
----------- -----------
Total bakery-cafe expenses 254,917 229,984
Fresh dough cost of sales to franchisees 24,835 24,779
Depreciation and amortization 17,009 16,419
General and administrative expenses 25,012 20,401
Pre-opening expenses 276 340
----------- -----------
Total costs and expenses 322,049 291,923
----------- -----------
Operating profit 42,161 28,786
Interest expense 168 166
Other (income) expense, net 307 (318)
----------- -----------
Income before income taxes 41,686 28,938
Income taxes 15,841 10,911
----------- -----------
Net income 25,845 18,027
Less: net income attributable to noncontrolling
interest - 595
----------- -----------
Net income attributable to Panera Bread
Company $ 25,845 $ 17,432
=========== ===========
Earnings per common share attributable to Panera
Bread Company:
Basic $ 0.83 $ 0.57
=========== ===========
Diluted $ 0.82 $ 0.57
=========== ===========
Weighted average shares of common and common
equivalent shares outstanding:
Basic 31,170 30,388
=========== ===========
Diluted 31,521 30,737
=========== ===========
Schedule I (continued)
PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
MARGIN ANALYSIS
(unaudited)
The following table sets forth the percentage relationship to total revenues, except where otherwise indicated, of certain items included in the Company's consolidated statements of operations for the period indicated. Percentages may not add due to rounding:
For the 13 Weeks Ended
March 30, March 31,
2010 2009
---------- ----------
Revenues:
Bakery-cafe sales 85.8 % 85.1 %
Franchise royalties and fees 5.7 5.8
Fresh dough sales to franchisees 8.5 9.1
---------- ----------
Total revenue 100.0 % 100.0 %
Costs and expenses:
Bakery-cafe expenses (1):
Cost of food and paper products 28.9 % 29.7 %
Labor 32.2 32.8
Occupancy 7.8 8.5
Other operating expenses 12.7 13.3
---------- ----------
Total bakery-cafe expenses 81.6 84.3
Fresh dough cost of sales to franchisees (2) 80.5 84.9
Depreciation and amortization 4.7 5.1
General and administrative expenses 6.9 6.4
Pre-opening expenses 0.1 0.1
---------- ----------
Total costs and expenses 88.4 91.0
---------- ----------
Operating profit 11.6 9.0
Interest expense - 0.1
Other (income) expense, net 0.1 (0.1)
---------- ----------
Income before income taxes 11.4 9.0
Income taxes 4.3 3.4
---------- ----------
Net income 7.1 % 5.6 %
Less: net income attributable to noncontrolling
interest - 0.2
---------- ----------
Net income attributable to Panera Bread
Company 7.1 % 5.4 %
========== ==========
(1) As a percentage of Company bakery-cafe sales.
(2) As a percentage of fresh dough sales to franchisees.
PANERA BREAD COMPANY
Schedule II - Supplemental Sales and Bakery-Cafe Information
Historical System-Wide AWS
----------------------------------
2009 2008 2007 2006
------- ------- ------- -------
AWS $39,926 $39,239 $38,668 $39,150
Year-Over-Year Change
2010 Company-Owned AWS By Year Opened in Company-Owned AWS
---------------------------------- ----------------------
2008 2009 2008
2010 2009 Opens & Opens Opens & AWS
Opens Opens Prior Total (a) Prior Total
------- ------- ------- ------- ------ ------ ------
Bakery-Cafes 3 30 555 588
Q1 10 $56,113 $37,384 $41,193 $41,040 -10.8% 10.2% 9.8%
Q2 10
Q3 10
Q4 10
2010 YTD $56,113 $37,384 $41,193 $41,040 -10.8% 10.2% 9.8%
(a) Change in Company-owned AWS in 2010 from 2009 compares 30 bakery-cafes
in 2010 against 4 bakery-cafes at the end of the first quarter of 2009.
2010 Franchise-Operated Year-Over-Year Change
AWS By Year Opened in Franchise-Operated AWS
---------------------------------- ----------------------
2008 2009 2008
2010 2009 Opens & Opens Opens & AWS
Opens Opens Prior Total (b) Prior Total
------- ------- ------- ------- ------ ------ ------
Bakery-Cafes 5 39 756 800
Q1 10 $44,220 $36,610 $42,927 $42,620 4.6% 9.5% 8.8%
Q2 10
Q3 10
Q4 10
2010 YTD $44,220 $36,610 $42,927 $42,620 4.6% 9.5% 8.8%
(b) Change in Franchise-operated AWS in 2010 from 2009 compares 39
bakery-cafes in 2010 against 10 bakery-cafes at the end of the first
quarter of 2009.
Bakery-Cafe Openings
-----------------------------------------------------------------
Company Franchise Total Company Franchise Total
--------- --------- ----- --------- --------- -----
Q1 10 3 5 8 Q1 09 4 10 14
Q2 10 Q2 09 4 10 14
Q3 10 Q3 09 9 10 19
Q4 10 Q4 09 13 9 22
2010 YTD 3 5 8 2009 YTD 30 39 69
AWS - average weekly sales for the time periods indicated.
PANERA BREAD COMPANY
Schedule III - Comparable Bakery-Cafe Sales Information
For the 4 For the 5 For the 4 For the 13
weeks ended weeks ended weeks ended weeks ended
January 26, March 2, March 30, March 30,
2010 2010 2010 2010
----------- ----------- ----------- -----------
Company-owned 9.5% 8.1% 12.7% 10.0%
Franchise-operated 9.3% 6.9% 12.1% 9.2%
System-wide 9.4% 7.4% 12.4% 9.5%
Company-owned comparable bakery-cafe sales percentages are based on sales from Company-owned bakery-cafes included in our base store bakery-cafes. In fiscal 2010 we have modified the method by which we determine bakery-cafes included in our comparable bakery-cafe sales percentages to include those bakery-cafes with an open date prior to the first day of our prior fiscal year. Previously, comparable bakery-cafe sales percentages were based on bakery-cafes that had been in operation for 18 months. Similarly, for fiscal 2010, franchise-operated bakery-cafes include only those bakery-cafes with an open date prior to the first day of our prior fiscal year. Franchise-operated comparable bakery-cafe sales percentages are based on sales from franchised bakery-cafes, as reported by franchisees, that are included in our base store bakery-cafes. Acquired Company-owned and franchise-operated bakery-cafes and other restaurant or bakery-cafe concepts are included in our comparable bakery-cafe sales percentages after we have acquired a 100 percent ownership interest and such acquisition date occurred prior to the first day of our prior fiscal year. Comparable bakery-cafe sales exclude closed locations. For the first quarter of fiscal 2010, the above described change had a favorable impact of 9 basis points to our reported Company-owned comparable bakery-cafe sales percentage and an unfavorable impact of 24 basis points to our franchise-operated bakery-cafe sales percentage.
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