Panera Bread (NASDAQ: PNRA ) is on the rise. The company recently reported earnings for the fourth quarter. And judging by the market's reaction, investors were happy with the results.
After the earnings announcement, the stock jumped by 3% before settling down to end with a 1% gain on the day. And that quick bump is just part of the more than 300% rise that shares have seen over the past five years.
Panera's headline numbers showed solid growth in the quarter, with earnings up 34% on a 15% boost in revenue. But, as usual, the headline numbers don't tell the whole story. Here are the five numbers that I think really explain why Panera's results have been so solid.
- 5.1%: First, Panera's comparable-store sales leapt by just over 5% in the quarter. That was enough to trounce McDonald's (NYSE: MCD ) flat growth, and to handily beat Yum! Brands' (NYSE: YUM ) 3% rise. It was also better than highflier Chipotle (NYSE: CMG ) could manage. The Tex-Mex chain booked just 3.8% sales growth over the same period. Panera got to its industry-thumping growth figure through a mix of both price increases and higher check averages. Menu prices kicked in about 2.5% of the boost, but the rest came from customers upgrading their orders to more expensive items.
- $47,029: Panera's new stores are getting more productive. The average weekly sales figure for the 59 new company-owned cafes Panera opened last year set an all-time record at over $47,000. That's a 13% bounce for the company's 2012 graduating class, up from the prior-year's figure of about $41,000. Those rocketing weekly sales numbers were helped along by the eight new cafes Panera opened in urban areas, including Manhattan, Boston, and Toronto. Considering the quick success it's had in densely populated areas, this could represent a key growth avenue in the years ahead.
- $75,000: Panera's customer demographic skews toward much higher average income than most casual-dining restaurants can claim. During the conference call with analysts, co-CEO Ron Shaich said that that fact gave the company flexibility over competitors like McDonald's and Chipotle, which have to constantly balance their prices against food cost inflation. Where its rivals need to fight over shaving pennies from value meals, Panera doesn't suffer from those same pressures. That also opens the company up for experimenting with bigger and more expensive menu options. For example, Panera plans to roll out an entirely new menu category this quarter which could boost check averages even higher: pasta.
- 29.3%: Food costs clocked in at less than 30% in the quarter, or exactly the same percentage of sales that Panera booked in the year-ago quarter. Thanks to the fact that the company supplies key ingredients to cafes through its own network of bakeries, Panera has a lock on its food costs like few restaurants do. Yum! Brands, for example, blamed commodity inflation for the slight deterioration in is restaurant level margins in the quarter. And Chipotle saw its own food costs rocket to over 33% of sales recently. While rivals are feeling the pinch of cost inflation, flat cost growth gives Panera even more flexibility on promotions and pricing changes.
- 120: Panera plans to cut the ribbon on between 115 and 125 new cafes in 2013. That's about exactly the same as the 123 locations that the company opened last year. Of course, all those new locations won't come cheap. It costs the company nearly $1 million in pre-opening expenses for each new location. Overall, though, Panera expects the new cafes to help power sales growth of between 4% and 5% this year. Operating margin is expected to stay roughly flat. And Panera's outlook calls for between 17% and 19% earnings growth for 2013. But if it beats that outlook by just a percentage point, this year will mark Panera's sixth consecutive year of 20% or better earnings growth.
The one number that has many investors nervous about Panera is 30. That's the earnings multiple the company's shares fetch right now. And it looks expensive when compared to other casual-dining businesses. McDonald's has a P/E of 18, and Yum! Brands, with all its potential growth in China, is valued at about 19 times trailing earnings. Still, given the strengths of Panera's business model -- and the fact that it routinely books earnings growth over 20% -- I think 30 times earnings isn't too high a price to pay for this solid performer.
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