Panera Slips on Stale Revenue and Reduced Outlook

Source: http://www.flickr.com/photos/scelera/

Source: http://www.flickr.com/photos/scelera/

Panera Bread (NASDAQ:PNRA) closed the regular trading session on Tuesday down 0.20 percent at $162.44 per share, and fell about 3 percent further in post-market trading after reporting underwhelming third-quarter financial results. Total revenue increased 8 percent on the year to $572.48 million, falling short of the mean analyst estimate of $584.19 million. Adjusted earnings increased 19 percent on the year to $1.48 per diluted share, beating the mean analyst estimate of $1.35 per share. However, earnings were inflated by a favorable tax readjustment of $3.8 million, or 13 cents per share.

System-wide comparable sales increased 1.3 percent on the year while operating margins remained flat. Panera corporate opened 17 new bakery-cafes, while franchises opened 15 new locations. All told, Panera ended the quarter with 1,736 locations. Total average weekly sales for the third quarter were $45,205, down from $47,438 in the year-ago period.

Looking ahead, Panera is expecting fourth-quarter earnings in a range between $1.91 and $1.97 per share (up 9 to 13 percent on the year), below the current mean analyst estimate of $2.08 per share. Full-year 2013 earnings are expected to be in a range between $6.77 and $6.83 per share (up 15 to 16 percent on the year), which includes the current mean analyst estimate of $6.81 per share.

Panera has taken investors on a wild ride this year. Shares tripped into 2013 trading around $162, climbed as high as $194.77 in May, and tanked in July, sliding to a recent low of about $157. Second-quarter earnings were a flop, hardly demonstrating the kind of high-growth that investors were looking for to justify the high valuation.

To be clear, Panera has earned its place in the current pantheon of quick-serve restaurants, but the company’s days of enormous growth on the stock chart may be coming to an end. Shares are down more than 12 percent over the past three-month period, while competitors like Starbucks (NASDAQ:SBUX) have climbed more than 15 percent.

Starbucks’ acquisition of La Boulange, a bakery chain, also promises to cramp Panera’s style. With superior scale, Starbucks could quickly become a serious competitor for customers looking to capitalize on Panera’s niche within the food industry.

Alongside the firm’s third-quarter earnings, CEO Ron Shaich commented “Panera generated the highest system wide year-to-date average weekly sales in its history. Indeed, average weekly sales at Panera through this quarter are up over 20% over the last 5 years… However, it is also true that in the third quarter comparable store sales rose just 1.7%. While these comparable store sales continue to be above average for the industry, they are below our expectations. As one might expect, our recent comp performance has led to a great deal of self-examination and a thorough review of how we compete and how we operate our business.”