Panera Bread Shares Decline On Weak Outlook, But Q1 Results Beat View

(RTTNews) - Shares of Panera Bread Co. (PNRA) declined more than 4 percent in extend trades Tuesday after the retail bakery-cafes operator forecast earnings for the second quarter below analysts' expectations and lowered the top end of its earnings outlook range as well as comparable sales growth for fiscal 2014.

The company also reported a 12 percent decline in profit for the first quarter from last year, as higher revenues were offset by weak comparable net bakery-cafe sales growth amid severe winter weather. However, both revenue and earnings per share for the quarter beat analysts' expectations.

St. Louis, Missouri-based Panera Bread's net income for the first quarter was $42.40 million or $1.55 per share, down from $48.12 million or $1.64 per share in the prior-year quarter. The prior-year quarter's results included a benefit from resolution of legal and tax matters of $2.2 million or $0.05 per share.

On average, 24 analysts polled by Thomson Reuters expected the company to report earnings of $1.52 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenue for the quarter increased 8 percent to $605.34 million from $561.78 million in the same quarter last year and beat analysts' consensus estimate of $597.44 million.

Bakery-cafe sales, which accounted for 88.5 percent of total revenues, increased 8 percent to $535.55 million. Franchise royalties and fees rose 9 percent to $28.89 million. Fresh dough and other product sales to franchisees also grew 9 percent to $40.90 million.

Operating margin for the quarter declined about 250 basis points to 11.1 percent. The decline was the result of continued investments to improve the company's operational capabilities, technical resources, and customer experience, as well as increased marketing expenses and the untoward impact of unusually severe winter weather in the latest quarter.

Company-owned, franchise-operated, and system-wide comparable net bakery-cafe sales on a calendar basis each increased 0.1 percent compared to the year-ago quarter. The company noted that unfavorable weather impacted company-owned comparable net bakery-cafe sales by 150 to 200 basis points. On a fiscal basis, company-owned comparable net bakery-cafe sales increased 0.7 percent.

The company-owned comparable net bakery-cafe sales increase of 0.1 percent was comprised of average check growth of 2.9 percent and a year-over-year transaction decline of 2.8 percent. Average check growth was comprised of retail price increases of about 1.7 percent and positive mix impact of about 1.2 percent.

During the quarter, the company opened 16 new bakery-cafes and its franchisees opened 11 new bakery-cafes. As a result, there were 1800 bakery-cafes open system-wide as of April 1, 2014.

Looking ahead to the second quarter, Panera Bread forecast earnings in a range of $1.70 to $1.76 per share, representing a range of a decrease of 2 percent to an increase of 1 percent from the year-ago period. Analysts expect the company to report earnings of $1.86 per share for the quarter.

Panera Bread noted that company-owned comparable net bakery-cafe sales growth on a calendar basis in the first 27 days of the second quarter were about 0.4 percent. The company estimates the shift of the Easter holiday from calendar Q1 2013 to calendar Q2 2014 negatively impacted the comparable sales results for the first 27 days by about 150 basis points.

For fiscal 2014, Panera Bread narrowed its earnings outlook to a range of $6.80 to $7.00 per share from the prior range of $6.80 to $7.05 per share. Analysts expect the company to report earnings of $6.93 per share for the year.

The company now targets company-owned comparable net bakery-cafe sales growth for fiscal 2014 of 2.0 percent to 3.5 percent, compared to the prior range of 2.0 percent to 4.0 percent. The revised outlook includes positive transaction growth.

The company maintained its previous outlook of 115 to 125 system-wide new bakery-cafe openings in fiscal 2014, and its average weekly net sales performance target for new company-owned bakery-cafes in a range of $41,000 to $43,000.

PNRA closed Tuesday's regular trading session at $163.18, down $0.15 or 0.09 percent on a volume of 1.32 million shares. The stock further declined $7.18 or 4.40 percent in after-hours trading to $156.00.