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Panera Bread Company Reports

The following excerpt is from the company's SEC filing.

Diluted EPS of

, Excluding One-Time Items

St. Louis, MO,

October 27, 2015

- Panera Bread Company (NASDAQ: PNRA) today reported financial results for fiscal Q3 2015.

HIGHLIGHTS

- Q3 2015 Revenue increased

$665 million

- Q3 2015 Company-owned comparable net bakery-cafe sales growth continued to accelerate, up 3.8% on a one-year basis and 5.9% on a two-year basis

- Q4 2015 (first 27 days) Company-owned comparable net bakery-cafe sales up 3.4% on a one-year basis and 6.7% on a two-year basis

- 108 bakery-cafes converted to Panera 2.0 during Q3 2015

- Company reaffirms full-year targets

Ron Shaich, Chairman and CEO, noted, "Our strategic plan to generate increased shareholder value by making Panera a better competitive alternative with runways for expanded growth is working. Leading sales indicators are showing just that. Company comp-store sales growth continues to accelerate, rising 3.8% in Q3 and 3.4% for the first 27 days of Q4."

Shaich continued, "We are particularly pleased with these results in light of the slowing sales reported across the industry in October. Q3 represented our best performance in nine quarters. Panera’s Q3 comps outperformed the industry by 229 bps when measured against the Black Box all-industry composite, the largest differential we’ve seen in 2 years."

Shaich concluded, "Our initiatives to expand into several $1 billion-plus adjacent businesses, including catering, delivery and consumer-packaged goods, are also gaining traction. Despite the high level of pressure on our near-term earnings related to the startup and transition costs associated with our strategic initiatives, the progress we see gives us increased confidence in our strategic plan and its ability to drive expanded earnings growth well into the future."

Fiscal Q3 2015 Results and Business Review

Net income was

$32 million

per diluted share, for fiscal

. Diluted EPS for fiscal Q3 2015 was

or down

, excluding charges recorded in fiscal Q3 2015 related to the Company's previously announced refranchising initiative of

per diluted share, and excluding the $0.08 per diluted share benefit in fiscal Q3 2014 from favorable tax adjustments. The fiscal Q3 2015 results compare to reported net income of

$39 million

2014. A reconciliation of GAAP and non-GAAP information is attached to this release as

Schedule IV

The Company's fiscal

consolidated statements of income and margin analyses are attached to this release as

. The following table sets forth, for the periods indicated, certain items included in the Company's consolidated statements of income (in thousands, except per share data and percentages), including net income and diluted EPS, excluding charges related

to the Company's refranchising initiative and favorable tax adjustments, and net income and diluted EPS, as reported:

For the 13 Weeks Ended

Percentage Change

September 29, 2015

September 30, 2014

Total revenue

$664,654

$619,890

Net income, excluding certain items

$33,779

$36,895

Refranchising loss, after-tax

(1,386

Favorable tax adjustments

Net income, as reported

$32,393

$39,214

Diluted EPS, excluding certain items

(0.05)

Diluted EPS, as reported

Shares used in diluted EPS

25,501

26,813

Comparable Net Bakery-Cafe Sales Growth

In fiscal

, Company-owned comparable net bakery-cafe sales increased

, franchise-operated comparable net bakery-cafe sales increased

, and system-wide comparable net bakery-cafe sales increased

compared to the same period in fiscal

. Two-year Company-owned comparable net bakery-cafe sales increased 5.9%, two-year franchise-operated comparable net bakery-cafe sales increased 2.5%, and two-year system-wide comparable net bakery-cafe sales increased 4.2%.

The Company-owned comparable net bakery-cafe sales increase of

was comprised of year-over-year transaction growth of

and average check growth of

. A schedule of comparable net bakery-cafe sales information is attached to this release as

Schedule III

Operating Margin

Operating margin for fiscal Q3 2015 declined approximately 120 basis points versus fiscal

, excluding charges related to the Company's refranchising initiative, as outlined in

. 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 Q3 2015 declined approximately 150 basis points versus fiscal Q3 2014.

New Bakery-Cafe Development and AWS

During fiscal

, the Company opened

new bakery-cafes and its franchisees opened

new bakery-cafes. As a result, there were

bakery-cafes open system-wide as of

Franchise-operated

Total System

Bakery-cafes as of June 30, 2015

Bakery-cafes opened

Bakery-cafes closed

Bakery-cafes refranchised

Bakery-cafes as of September 29, 2015

Average weekly sales (“AWS”) for Company-owned "Class of 2015" bakery-cafes through fiscal

$45,248

. AWS for franchise-operated "Class of 2015" bakery-cafes through fiscal

$47,394

A schedule of fiscal

AWS, including AWS information for bakery-cafes based on their designation as either a traditional or non-traditional bakery-cafe, is attached to this release as

. Non-traditional bakery-cafes refers to a range of alternate formats that the Company believes will allow it to more deeply penetrate existing and new territories with a range of different formats.

Update on Key Value Enhancing Initiatives

Use of Capital

, the Company repurchased

682,888

shares at an average price of

$183.02

per share for an aggregate purchase price of approximately

$125.0 million

. The Company had approximately

$408.4 million

available under the

$750 million

repurchase authorization as of Q3 2015.

The Company continues to make significant progress on its plan to refranchise 50 to 150 bakery-cafes. On October 7, 2015, the Company completed the sale of 45 bakery-cafes to a new franchisee, bringing the year-to-date number of refranchised bakery-cafes to 75.

Panera 2.0 Conversions

As of fiscal Q3 2015, the Company had completed the conversion of 291 bakery-cafes to Panera 2.0, with 108 conversions completed during Q3 and 185 conversions completed year-to-date.

Full Year Fiscal 2015 Outlook

The Company today is reiterating its Company-owned comparable net bakery-cafe sales growth target for fiscal 2015 at 2.0% to 3.5%.

The Company continues to target the conversion of approximately 300 Company-owned bakery-cafes to Panera 2.0 during fiscal 2015, two-thirds of which are occurring in the second half of the fiscal year.

For fiscal 2015, the Company continues to target operating margin will be down 100 to 175 basis points when...


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