Viva Panera

I came, I saw, I ate at Panera Bread (Nasdaq: PNRA  ) .

This mantra has become almost as much of routine in my daily life over the past several months as "wash, rinse, repeat." Others seem to have followed my rallying cry, if the company's first-quarter 2006 results are any indication.

After making adjustments to a more consistent 13-week quarterly calendar, revenues increased by 35%, half of that amount derived from the aggressive expansion of new stores. Other factors contributing to the jump include strong breakfast sales and an increasing percentage of revenues from the Via Panera catering side of the business. Comparable bakery-cafe sales increased by 9% and continue the streak of high-single-digit gains. Of this increase, 7.8% came from higher weekly sales -- a good portion of which I was personally responsible for. Taken together, these factors contributed to a 31% increase in diluted earnings per share on a pro forma basis.

What impresses most about the growth rate is how efficiently it has been handled. Most companies have crumbled when attempting to grow their store base at such a fast pace. Boston Market, Fuddruckers, and, more recently, Krispy Kreme (NYSE: KKD  ) are all examples of how rapidly a balance sheet can deteriorate when growth goes unchecked. CEO Ronald Shaich recently commented that the U.S. market may be able to support up to 5,000 stores. That would mean that as long as the company remains financially healthy, this kind of growth could be sustained for nearly another decade.

Little has changed since annual results were reported in February, including the share price. The market seems to be hesitant to push the price into the upper range of its historical valuation, even though full-year guidance for diluted EPS was raised again. That could be due to lower expectations of same-store sales in the second quarter from a shift in the timing of the Easter holiday, or that the strong second half of 2005 will make it more difficult to outperform in the later half of this year.

Whatever the reason, I do have to disclose that I am bitter for missing the drop to the low 50s last fall. At this point, I'm probably just hoping the market will miss the forest for the trees at some point and misleadingly punish the stock. But I have yet to find a situation where chasing a stock is good in the long term, so I'm not about to start now. Anyway, there are plenty of paninis, cinnamon crunch bagels, and, on special occasions, a Jones Soda (Nasdaq: JSDA  ) to help me pass the time.

Fool contributor John Bluis does not own shares of any stock mentioned in this article. The Motley Fool is investors writing for investors.


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