Panera (Nasdaq: PNRA ) just can't get it right this year. Although it did meet its already reduced second-quarter earnings forecast, it's still finding itself in a position where it consistently has to set guidance lower.
The cafe and bakery operator reported second-quarter net income down 10% to $12.6 million, or $0.39 per share. Revenues increased 28% to $253 million, and same-store sales increased 2.1% overall (comps were up 1.7% in company-operated stores and 2.3% in franchised shops).
Of course, the stock's taking a licking today because of Panera's guidance. Its third-quarter guidance calls for earnings of $0.32 to $0.38 per share, and analysts were expecting third-quarter earnings of $0.43 per share. Panera said its 2007 guidance is $1.72 to $1.88 for the entire year. (The company said it's still experiencing margin pressure, and it's not the only one, as Starbucks (Nasdaq: SBUX ) just raised prices on its beverages because of the high costs of dairy, energy, and fuel, for example.) Still, Panera's 2007 guidance is lower than expectations for earnings of $1.99 per share this year.
As I've said before, I think Panera is a neat company, although admittedly, it faces competition from many sources for consumers' appetites. Breakfast, lunch, pastries, coffee -- you can get those from any number of sources as wide ranging as Starbucks, McDonald's (NYSE: MCD ) , Chipotle Mexican Grill (NYSE: CMG ) (NYSE: CMG-B ) , or Cosi (Nasdaq: COSI ) . Of course, Panera's fresh-baked bread focus is a nice competitive advantage even if the company is facing margin pressure at the moment.
Panera's shares may have hit a new 52-week low today, but that doesn't mean it's cheap enough in a time of uncertainty. The company may be trading at about 17 times expected 2008 earnings, but with earnings growth expected to be lackluster or maybe even decreasing this year, it's not hard to imagine investors might feel that less than optimistic. I'd say nobody could be blamed for passing on Panera for the moment.
Here's more on Panera from the Foolish archives:
- Earlier this month, I didn't think it was quite time for a slice of Panera.
- Panera was pummeled in June.
- Even with all the bad news this summer, Zagat voted Panera a top chain not long ago.