Panera Bread Company Reports Q2 2016 Results

Panera Bread Company Reports Q2 2016 Results;

Company-owned Comparable Net Bakery-Cafe Sales Increased 4.2%; Raises Mid-Point of FY 2016 Non-GAAP EPS Target

Panera Bread Company(PNRA)- NASDAQ

St. Louis, MO, July 26, 2016 – Panera Bread Company (NASDAQ: PNRA) today reported financial results for fiscal Q2 2016.

HIGHLIGHTS

– Q2 2016 Company-owned comparable net bakery-cafe sales up 4.2%, up 6.6% on a twoyear basis

– Q3 2016 (first 27 days) Company-owned comparable net bakery-cafe sales up 3.1%, up 7.8% on a two-year basis

– Q2 2016 GAAP Diluted EPS of $1.46, down 9%

– Q2 2016 Non-GAAP Diluted EPS (excluding refranchising charges) of $1.78, up 11%

– Company raises mid-point of FY 2016 Non-GAAP EPS target; full year Non-GAAP EPS target range is now $6.60 to $6.70, up 6% to 8%

– Company agrees to sell and refranchise Company-owned bakery-cafes in Canada

Ron Shaich, Chairman and CEO, commented, “Our strong Q2 results reinforce the fact that our strategy is working and our initiatives are performing. Panera is becoming a better competitive alternative with expanded runways for growth. At a time when other restaurant companies are feeling the impact of a slowing consumer environment, we are maintaining our momentum. Oneyear comps of 4.2% and two-year comps of 6.6% speak to the traction at Panera. As well, that momentum can be seen in the year-over-year growth in Q2 non-GAAP EPS, which excludes refranchising charges, which was up 11%. Most importantly, as our initiatives rollout, we can, with the benefit of significantly more robust and mature data, now more clearly see the potential that those initiatives represent for sustained earnings growth at Panera.”

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Fiscal Q2 2016 Results and Business Review

GAAP net income for fiscal Q2 2016 was $35 million, or $1.46 per diluted share, or down 9% when compared to GAAP net income for fiscal Q2 2015 of $42 million, or $1.60 per diluted share.

Excluding refranchising charges in both quarters (see table below), non-GAAP diluted EPS was $1.78 for fiscal Q2 2016 and $1.61 for fiscal Q2 2015, up 11%. A reconciliation of GAAP and nonGAAP information and the reasons why the Company uses non-GAAP financial measures is attached to this release as Schedule IV.

The Company’s fiscal Q2 2016 consolidated statements of income and margin analyses are attached to this release as Schedule I. 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 GAAP net income and diluted EPS and non-GAAP net income and diluted EPS, which excludes charges related to the Company’s refranchising initiative:

Comparable Net Bakery-Cafe Sales Growth In fiscal Q2 2016,

Company-owned comparable net bakery-cafe sales increased 4.2%, franchiseoperated comparable net bakery-cafe sales increased 0.6%, and system-wide comparable net bakery-cafe sales increased 2.3% compared to the same period in fiscal 2015. Two-year Companyowned comparable net bakery-cafe sales increased 6.6%, two-year franchise-operated comparable net bakery-cafe sales increased 1.7%, and two-year system-wide comparable net bakery-cafe sales increased 4.1%.

The Company-owned comparable net bakery-cafe sales increase of 4.2% in fiscal Q2 2016 was comprised of year-over-year transaction growth of 0.4% and average check growth of 3.8%. This represents the ninth consecutive quarter of transaction growth. A schedule of comparable net bakery-cafe sales information is attached to this release as Schedule III.

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Bakery-Cafe Margin

Bakery-cafe margin for fiscal Q2 2016 increased approximately 120 basis points versus fiscal Q2 2015. The increase was primarily driven by lower food cost due to improved leverage from higher comparable net bakery-cafe sales and benign food cost inflation, partially offset by structural wage increases and costs related to the startup and transition expenses associated with the Company’s strategic initiatives

Operating Margin

GAAP operating margin for fiscal Q2 2016 decreased approximately 150 basis points versus fiscal Q2 2015. Excluding charges related to the Company’s refranchising initiative in both fiscal periods, as outlined in Schedule IV, non-GAAPoperating margin for fiscal Q2 2016 decreased approximately 50 basis points versus fiscal Q2 2015. The decrease was primarily the result of structural wage increases and costs related to the startup and transition expenses associated with the Company’s strategic initiatives, as well as a year-over-year increase in general and administrative expenses reflecting a legal reserve and higher incentive compensation due to improved year-over-year Company performance.

New Bakery-Cafe Development and AWS

During fiscal Q2 2016, the Company opened nine new bakery-cafes and its franchisees opened eight new bakery-cafes. As a result, there were 2,007 bakery-cafes open system-wide as of June 28, 2016.

Average weekly sales (“AWS”) for Company-owned “Class of 2016” bakery-cafes through fiscal Q2 2016 was $52,256. AWS for franchise-operated “Class of 2016” bakery-cafes through fiscal Q2 2016 was $46,319. A schedule of fiscal Q2 2016 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 Schedule II. 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.

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Update on Refranchising and Canada Strategic Review

On May 3, 2016, the Company completed the previously announced sale of 15 bakery-cafes in the Portland, Oregon, market to an existing franchisee, bringing the total number of refranchised bakery cafes since the start of fiscal 2015 to 90.

Today, the Company announced it has signed a definitive agreement to sell and refranchise 12 Company-owned bakery-cafes in Canada to a Canada-based franchisee with a long track record of success with US concepts. The Company anticipates this transaction to close by the end of fiscal Q3 2016. The Company expects the sale of these bakery-cafes to be accretive to ongoing earnings. This ongoing accretion was included in the Company’s full-year fiscal 2016 non-GAAP EPS target. Acharge of $7.2 million related to the pending sale of these bakery-cafes was incurred in fiscal Q2 2016

Update on Use of Capital

On May 19, 2016, the Company’s Board of Directors approved a new three-year share repurchase authorization of up to $600 million and terminated the prior repurchase authorization. During fiscal Q2 2016, under the share repurchase authorizations, the Company repurchased 351,376 shares at an average price of $213.45 per share for an aggregate purchase price of approximately $75.0 million. The Company has approximately $572.7 million available under the current $600 million repurchase authorization as of fiscal Q2 2016.

 

 

 

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