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Third Quarter 2004 revenues up 32% - Third Quarter 2004 earnings per diluted share up 22%
- 34 bakery-cafes opened in the quarter, bringing year-to date openings to 102
- System-wide bakery-cafes reach 701 units as of October 2, 2004
- 2004 EPS target range narrowed to $1.24-1.26, an increase of 23% to 25%
- 2005 EPS target range established at $1.50-1.55, an increase of 19% to 25%
- J. D. Power and Associates names Panera #1 in customer satisfaction in N.E. and Midwest
Panera Bread Company (Nasdaq: PNRA) today reported that earnings per diluted share increased 22% to $0.28 for the 12 weeks ended October 2, 2004 compared to $0.23 per diluted share for the 12 weeks ended October 4, 2003. Net income for the 12 weeks ended October 2, 2004 increased 22% to $8,536,000 compared to $7,017,000 for the same period in the prior year.
For the 40 weeks ended October 2, 2004, earnings per diluted share increased 19% to $0.80 compared to $0.67 for the 40 weeks ended October 4, 2003. Net income for the 40 weeks ended October 2, 2004 increased 21% to $24,448,000 compared to $20,252,000 for the 40 weeks ended October 4, 2003. Prior year results are stated before the cumulative effect of a change in accounting principle relating to the adoption of SFAS 143, "Accounting for Asset Retirement Obligations." In the 16 weeks ended April 19, 2003, the Company recorded an after tax charge of $0.2 million, or $0.01 per diluted share to record the cumulative effect of this accounting change.
Company and franchisee revenues for the 12 and 40 weeks ended October 2, 2004, compared to the 12 and 40 weeks ended October 4, 2003, were as follows:
12 Weeks Ended 12 Weeks Ended Percentage
October 2, 2004 October 4, 2003 Increase
Company revenues $113,772,000 $85,913,000 32 %
Franchisee revenues $206,334,000 $171,075,000 21 %
40 Weeks Ended 40 Weeks Ended Percentage
October 2, 2004 October 4, 2003 Increase
Company revenues $348,993,000 $267,035,000 31 %
Franchisee revenues $649,108,000 $526,338,000 23 %
Comparable bakery-cafe sales increases for the 4, 12, and 40 weeks ended October 2, 2004 were as follows (comparable bakery-cafes include those bakery- cafes that have been open for at least 18 months):
4 Weeks Ended 12 Weeks Ended 40 Weeks Ended
October 2, 2004 October 2, 2004 October 2, 2004
Company 1.3% 2.2% 2.3%
Franchisee 0.4% 1.2% 1.5%
System-wide 0.7% 1.5% 1.7%
Ron Shaich, chairman and chief executive officer commented: "We want to note that our third quarter comparable sales increase of 1.5% was achieved in a difficult sales environment that included multiple hurricanes affecting our bakery-cafes located in Florida and other southeastern states. We estimate comparable sales growth without the hurricanes would have been approximately 2.2%."
System-wide average weekly sales for the 12 weeks ended October 2, 2004, were $35,664, a decrease of 0.5% from average weekly sales of $35,826 for the same period in the prior year. Average weekly sales were also negatively impacted by lost sales resulting from the aforementioned hurricanes. A summary of bakery-cafe average weekly sales and operating weeks is as follows:
12 Weeks Ended 12 Weeks Ended Percentage
October 2, 2004 October 4, 2003 Increase/(Decrease)
Average weekly
bakery-cafe sales $35,664 $35,826 (0.5%)
Operating weeks 8,211 6,528 25.8%
System-wide average weekly sales for the 40 weeks ended October 2, 2004, were $35,301 per week, an increase of 0.4% over average weekly sales of $35,172 for the same period in the prior year. A summary of bakery-cafe average weekly sales and operating weeks is as follows:
40 Weeks Ended 40 Weeks Ended Percentage
October 2, 2004 October 4, 2003 Increase
Average weekly
bakery-cafe sales $35,301 $35,172 0.4%
Operating weeks 25,839 20,509 26.0%
As of October 2, 2004, there were 701 Panera Bread bakery-cafes open. During the 12 weeks ended October 2, 2004, 34 new bakery-cafes were opened and 2 were closed in conjunction with relocations. The breakdown of bakery-cafes by company-owned and franchised is as follows:
Company-owned Franchised Total System
Bakery-cafes as of July 10,
2004 197 472 669
Bakery-cafes opened 15 19 34
Bakery-cafes closed - 2 2
Bakery-cafes acquired (sold) - - -
Bakery-cafes as of October 2,
2004 212 489 701
Ron Shaich commented: "We are satisfied to report third quarter earnings results at the mid-point of our targeted range despite the unexpected challenges faced in the quarter. Severe weather in the Southeast resulted not only in lost sales, but also in increased costs in our Fresh Dough Facilities related to maintaining uninterrupted manufacturing and delivery of dough during the hurricanes. Higher than planned fuel costs and an increase in workers compensation costs created additional pressure on quarterly results."
Business Outlook
2004 and Fourth Quarter
The company is now targeting 2004 earnings per diluted share of $1.24-1.26 per share, an increase of 23% to 25% from 2003. This implies fourth quarter earnings per diluted share in the range of $0.42 to $0.44, an increase of 24% to 29% from fourth quarter 2003. It is important to note that fourth quarter and full year earnings per diluted share are computed using different weighted average shares.
Assumptions underlying these targets include development of 16 new company and 27 new franchise bakery-cafes in the fourth quarter, resulting in full- year development of 145 bakery-cafes (55 company-owned and 90 franchised units). In addition, it assumes average unit volumes of 2004 openings of at least $1.85 million, and fourth quarter system-wide comparable bakery-cafe sales increases of 3-4%. Finally, this target assumes higher than planned fuel costs and workers compensation costs.
Ron Shaich continued, "We normally do not provide interim sales updates, but as the comp-sales trend line has changed significantly, we want to inform investors that during the first three weeks of the fourth quarter, system-wide comparable sales have increased by 5.3%. However, we should caution against reading too much into these results, as these comps are being measured against the weakest period in the year-ago quarter."
2005
Neal Yanofsky, executive vice president and chief administrative officer, commented: "We are today establishing a preliminary earnings per diluted share target for 2005 of $1.50-$1.55. This represents an increase of 19% to 25% over the targeted 2004 results. Key assumptions underlying the target range are new bakery-cafe development of 150-160 (70 company-owned and 80 to 90 franchised), annualized average unit volumes of new bakery-cafes of $1.85-$1.95 million and system-wide comparable bakery cafe sales increase of 2-4%."
The company also indicated it will be implementing a new fiscal calendar in 2005 and 2006. In 2005 the company will change its fiscal week to end on Tuesday rather than Saturday. Making these changes will allow Panera's operations team to better serve customers, by shifting weekly closing activities to a less busy day of the week. As a result, Panera Bread's fiscal year will end on December 27, 2005 and consist of fifty-two and a half weeks rather than the fifty-three-week year that would have resulted without the calendar change. In fiscal 2006, Panera Bread will convert to a 4-4-5 fiscal calendar whereby each quarter will include 13 weeks.
Shaich noted, "We are gratified that, according to the 2004 Restaurant Satisfaction Study by J.D. Powers and Associates, based on responses from nearly 55,000 customers, Panera Bread ranked highest among quick service restaurants in the Midwest and Northeast regions, receiving the highest ratings in all four measures of customer satisfaction -- environment, meal, service and cost -- in the Northeast, and led the Midwest region in environment, meal and service.
"This comes on top of Sandelman & Associates' Quick Track survey of 62,205 users that ranked Panera Bread #1 among 110 restaurant chains; and Restaurants & Institutions 'Choice in Chains' national consumer survey of more than 2,600 restaurant customers, in which Panera Bread received the top scores in the food quality, service, atmosphere, cleanliness and reputation categories."
Shaich concluded, "We are extraordinarily excited that consumers appreciate what makes Panera special, as we believe their satisfaction is the most important leading indicator of our future success."
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