Sales spur earnings gain at Panera Bread

by Eric Schroeder
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ST. LOUIS — Stronger sales and higher margins helped drive a 33% gain in earnings at Panera Bread Co. in the second quarter. Net income in the quarter ended June 29 totaled $26,704,000, equal to 86c per share on the common stock, up from $20,029,000, or 65c per share, in the same period a year ago. Net sales during the second quarter totaled $378,124,000, up 14% from $330,794,000.

For the first half of fiscal 2010, net income rose 40% to $52,549,000, or $1.69 per share, from $37,461,000, or $1.23 per share. Net sales increased 14% to $742,334,000.

The second-quarter results bettered the average estimates of analysts, but shares of the St. Louis-based bakery cafe chain trended lower following the announcement that the third-quarter outlook would not be as strong as previously expected.

Panera said it expects to earn 71c to 73c per share in the third quarter, below analysts’ estimates of 75c. But for the full year, Panera raised its 2010 full-year earnings-per-share guidance to $3.50 to $3.52, up from earlier guidance of $3.40 to $3.44. Analysts currently expect the company’s 2010 full-year profit to be about $3.49 per share.

During the second quarter, Panera and its franchisees opened 13 new bakery cafes, sold 3 bakery cafes in its Mobile, Ala., market to an existing franchisee, and acquired a majority interest in 3 bakery cafes in the Ontario market from a franchisee.

In a July 28 conference call with analysts, Bill Moreton, president and chief executive officer of Panera, said the company continued to expand its breakfast sandwich program with the rollout of the Asiago Bagel Breakfast Sandwich in the first quarter and the Jalapeno Cheddar Bagel Sandwich in the second quarter.

“This continues to bring new news to our popular breakfast sandwich lineup and marries our bakery heritage with our high quality ingredients by making bagels a carrier for our breakfast sandwiches,” Mr. Moreton said. “Our breakfast increases have also been driven by our new Strawberry and Cream Scone and Apple Crunch Muffins.”

Looking ahead, Mr. Moreton said Panera has a new panini grill ready for commercialization and rollout. The equipment is expected to give Panera a platform for innovation and leadership in the hot sandwich category in 2011, he said.

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