Panera first-quarter earnings fall 17%

by Eric Schroeder
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ST. LOUIS — Higher wheat costs coupled with an increase in labor and interest expenses led to lower earnings at Panera Bread Co. in the first quarter. Net income in the first-quarter ended March 25 totaled $12,440,000, equal to 42c per share on the common stock, down 17% from $15,043,000, or 48c per share, in the same period a year ago. Net sales were $304,978,000, up 27% from $239,676,000.

For the quarter, company-owned bakery-cafe sales were up 3.3% and franchise-operated bakery-cafe sales were up 1.7%.

Panera said higher wheat costs forced the company to absorb approximately $2.5 million in costs year-over-year in its bakery-cafe cost of sales and an additional $2.2 million of costs in its fresh dough cost of sales to franchisees during the first quarter. The company said the impact of wheat costs during the quarter adversely affected bakery-cafe margin by approximately 100 basis points and operating margin by approximately 150 to 160 basis points.

Panera said it was able to overcome these costs in part by removing Crispani from its menus, as well as through disciplined pricing and category management programs.

During the first quarter the company opened 27 new bakery-cafes systemwide and closed five.

Looking ahead, Panera increased its earnings per share target for the second quarter of 2008 to 40c to 44c from 37c to 43c. Panera said the target assumes the negative impact of up to 4c per share in income tax expense, rising gasoline prices and incremental litigation expenses.

For the full year, Panera reaffirmed its e.p.s. growth target of $2 to $2.11 per share.

"Despite the skittishness of the consumer and the economic uncertainties in our country, we see our continued ability to improve margins while driving positive transaction growth as a real indicator of consumer acceptance of our concept and the strength of our plan," said Ron Shaich, chairman and chief executive officer.

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