ST.LOUIS — Despite taking a hit from rising ingredient and labor costs, net income at Panera Bread Co. in the third quarter rose 10% behind the strength of additional store openings. Net income in the third quarter ended Sept. 25 was $11,943,000, equal to 38c per share on the common stock, up from $10,879,000, or 35c per share, in the same period a year ago.
Total revenue was $273,213,000, a 33% increase compared with $204,954,000 during the same quarter of 2006.
"Despite operating in a very uncertain consumer and cost environment, our concept remains strong as evidenced by our industry leading customer satisfaction ratings, high unit volumes and resulting strong bakery-cafe return on investment," said Ron Shaich, chairman and chief executive officer. "These factors speak to our potential for future growth. Having said that, we also recognize the challenges experienced in the past year. As a result, we have charted a clear plan to overcome existing margin compression while maintaining transactions and we’ve begun to make some encouraging progress."
Panera said it experienced margin contraction during the third quarter, as consumers shifted away from soups and sandwiches to higher food cost salads and away from self-manufactured bread and bagels. The company also said product ingredient costs rose more rapidly than prices, while labor costs rose more rapidly than sales.
During the third quarter, the company opened 35 new bakery-cafes system-wide and closed two bakery-cafes system-wide. In addition, comparable bakery-cafe sales increased 2.6%, while system-wide average weekly sales decreased 0.1%.
For the nine months ended Sept. 25, net income was $39,622,000, or $1.25 per share, down narrowly from $39,943,000, or $1.28 per share, during the same period of the previous year. Total revenue for the period was $765,847,000, a 28% increase compared with $596,059,000 during the same period of 2006.
The company set its fourth-quarter earnings per share (e.p.s.) target at 53c to 59c, assuming system-wide comparable bakery-cafe sales growth of 1% to 3.5%, system-wide average weekly sales of $39,700 to $40,700.