News

Panera reports mixed Q2 financials

July 27, 2016

Panera Bread Co. is taking the good news with the bad today, reporting a 9 percent drop year over year with Q2 net income of $34.5 million. The company ended the quarter at $1.46 per share, down from $1.60 per share last year when net income was $41.9 million.

CEO Ron Shaich remained optimistic during this morning's earnings call, however, reminding investors that the chain is pushing through a $7 million deal with a Canadian franchisee and that Q2 sales at company-owned cafes were up 4.2 percent over the same period last year. (Sales were up only 0.6 percent at franchised units.)

"Our strong Q2 results reinforce the fact that our strategy is working and our initiatives are performing," Shaich said. "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."

Panera's Q2 income drop stems from the chain's agreement to sell and refranchise 12 company-owned Canadian units to a Canada-based franchisee.  Although the transaction should close by the end of fiscal Q3, the chain incurred a Q2 charge of $7.2 million related to the pending sale. 

Shaich said momentum is also driving the 11 percent year-over-year growth in Q2 non-GAAP EPS, which excludes refranchising charges.

"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," he said.

It's been two years since the chain rolled out Panera 2.0, a suite of technology updates aimed at improving the customer experience, and the chain's multiyear strategy for transformation is working, Shaich said during the call.

"We are indeed reducing friction with Panera 2.0, while increasing desire through innovations and operations, food, marketing and store design," he said. "We are also building new runways for growth and very large adjacent $1 billion-plus businesses through our catering, delivery and consumer product initiatives and by evolving our approach to traditional cafe growth.

"At the same time, we're building the technology and human capabilities needed to accomplish our objectives and finding opportunities for value enhancement to help fund our future."

Q2 Highlights

• GAAP diluted EPS of $1.46, down 9 percent;
• non-GAAP diluted EPS of $1.78, up 11 percent;
• raised midpoint of FY 2016 non-GAAP EPS target — range is now $6.60 to $6.70, up 6 to 8 percent; and
• will sell and refranchise company-owned bakery-cafes in Canada.