Panera Bread Stays Neutral - Analyst Blog
December 11 2013 - 12:00PM
Zacks
Despite soft third quarter results posted on Oct 22, 2013 and a
lowered outlook for the year, we reaffirmed our Neutral
recommendation on Panera Bread Company (PNRA)
encouraged by the company’s initiatives to boost sales.
Why the Reiteration?
Panera’s top line missed the Zacks Consensus Estimate in the third
quarter of 2013 while its bottom line matched the same. For full
year 2013, the company expects comps to increase in the range of 2%
to 2.75%, down from the previously guided range of 3% to 5% as
comps growth fell short of the guided range of 2%–4% during the
quarter. The company also narrowed its 2013 earnings guidance to a
range of $6.77–$6.83 from $6.75–$6.85.
Following the dismal results, estimates for the year largely moved
downwards over the past 60 days. The Zacks Consensus Estimate over
the past 60 days has declined 1.9% to $6.68.
Back to back declines in earnings and comps guidance due to soft
comps and continuous decline in transactions in the last three
quarters are concerns.
However, the company has strong long-term fundamentals. Panera is
one of the few casual dining chains, which have been expanding
steadily in an anemic economy. The company is investing heavily in
several initiatives to improve operational efficiency, customer
service and core enterprise systems. The company’s salad and
sandwich offerings are gaining traction. During the quarter, Panera
added new offerings such as salad, pasta, and egg soufflé. In
fiscal 2014, the company plans to come up with freshly baked Panera
flatbreads and artisan flatbreads. This solid menu pipeline and
aggressive advertising spending would help the company to improve
its top line.
Meanwhile, the company is also working on improving entrée growth.
Entrée growth reflects better demand for cafes. Entrees have
increased steadily since 2011. Despite a 1.0% decline in
transactions, entrée was up approximately 1.0%. This demonstrates a
problem in meeting demand. Therefore, in order to keep a balance
between transaction and entrée growth, the company is focusing on
product, environment, service and people. It plans to add
approximately 35 additional hours per week at cafes. By Feb 2014,
the company intends to acquire additional production equipment to
handle incremental demand. Going forward, these initiatives are
expected to drive both entrée and transaction growth.
Though these initiatives sound encouraging, the benefits of these
will not be realized before late-2014/2015. On the contrary,
increased investments for these initiatives will put pressure on
margins in the near term.
Other Stocks to Consider
Panera Bread presently carries a Zacks Rank #4 (Sell). Some
better-ranked stocks in the industry include Buffalo Wild
Wings Inc. (BWLD), Burger King Worldwide,
Inc. (BKW) and Cracker Barrel Old Country Store,
Inc. (CBRL). All these hold a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis Report
BUFFALO WLD WNG (BWLD): Free Stock Analysis Report
CRACKER BARREL (CBRL): Free Stock Analysis Report
PANERA BREAD CO (PNRA): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Buffalo Wild Wings, Inc. (delisted) (NASDAQ:BWLD)
Historical Stock Chart
From Jun 2024 to Jul 2024
Buffalo Wild Wings, Inc. (delisted) (NASDAQ:BWLD)
Historical Stock Chart
From Jul 2023 to Jul 2024
Real-Time news about Buffalo Wild Wings, Inc. (delisted) (NASDAQ): 0 recent articles
More Buffalo Wild Wings, Inc. (MM) News Articles