Panera Bread Releases Steady 1Q07 Results, Expects Upside Next Quarter

Yesterday, Panera Bread (PNRA) reported 1Q 2007 results.

Highlights

Revenue up 24% to $240 million from $194 million in 1Q 2006

Company-owned bakery-cafe SSS down 0.6%, up 0.2% for franchise-operated bakery-cafes, overall SSS growth 0%

Average weekly sales down 2.9% to $38,359 ($36,839 for company-owned and $39,313 for franchise-operated)

Net income $15,043,000 ($0.47 per share) compared to $15,013,000 ($0.47 per share) in 1Q 2006

Diluted share count 32,187,000

Opened total of 31 bakery-cafes (14 company-owned and 17 franchise-operated), acquired four bakery-cafes from a franchisee, and shut down one company-owned bakery-cafe

Currently operating a total of 1,101 bakery-cafes

Purchased 51% of the outstanding stock of Paradise Bakery & Cafe, owner of 22 company-owned bakery-cafes and 22 franchise-operated bakery-cafes

2Q 2007 Guidance

Estimating EPS of $0.47 to $0.51

Expecting SSS growth of 3.5% to 4.5%

Expecting average weekly sales of $38,500 to $39,500

Planning to open 32 bakery-cafes (17 company-owned and 15 franchise-operated)

For the year

Including Paradise openings, management is now expecting to open a total of 180 to 194 new bakery-cafes (90 to 97 company-owned and 90 to 97 franchise-operated)

These results were on target with analyst estimates of an EPS of $0.47 on sales of $239.78 million. I feel these are very good results considering the pressure the company faced. Management has blamed these results on extreme weather in their main markets, which they did note was going to probably put extra pressure on the company several times over the past few months, so it isn't much of a surprise. They held steady and are still reporting a very decent quarter.

With that said, the 2Q should be a nice improvement from this one. Weather isn't expected to be quite as bad, so if that really was a major part to the slow-down, things should improve. Most restaurants with Panera's style (casual sit-down) have also had a rough time in this quarter and have blamed it on poor weather as well. Panera is still a strong company, and as we get into spring and early summer, I wouldn't be surprised to see them report some nice numbers. Summer is often the best time for restaurants, and since Panera has held steady through the rough weather, they should do very well over the next couple quarters. Of course, anything can happen in that time, so we will need to be alert and aware of what's happening. But from what I see, many restaurant CEOs and leaders are expecting better results in the coming quarters.

I like the rate Panera is expanding at. Their heaviest expansion evidently is going to come in the second half of this year, but I'm glad to see that they are still opening a good amount of bakery-cafes now. I'm thinking that this summer will be a very good one for Panera, and that will be able to fuel higher expansion in the third and fourth quarter's. I think management does have a plan set up for this year, and it's good to see them cautiously expanding during the tougher times. I'm looking forward to seeing what they can do in the 3Q especially, I think that will be a strong quarter.

For the coming 2Q, analysts are expecting an EPS of $0.51 on sales of $253.62 million. The EPS estimate will probably be lowered a bit considering it's at the high end of management's expectations.

Disclosure: Author is long PNRA