Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Panera Bread Co. Slides on Weak Guidance

Shares of fast casual giant Panera Bread Company (NASDAQ: PNRA  ) were down over 5%  after slow same-store sales growth and weak guidance were announced in the company's latest earnings release. While the quarter wasn't great, first quarter results look mixed depending on which competitor, Chipotle (NYSE: CMG  ) or Noodles & Company (NASDAQ: NDLS  ) , is used for comparison. 

Panera's first quarter 
For the first quarter of 2014, Panera's revenues grew 8% year over year, while net income declined 12%. The company's actual revenue ($605m) and net income ($42.4m), both beat Wall Street expectations, yet the stock slid on poor guidance for the fiscal year 2014. Panera's EPS range 2014 was guided down 5% to $6.80-$7.00, which is leaving a sour taste in investors mouths. Although, to get a true sense of where the company is heading a deeper dive into the latest quarter is needed. 

Evaluating the quarter
Considering how often Wall Street analysts estimates are incorrect, Panera's net income "beat" isn't a great thing. The decline in net income looks poor on face value (a 12% drop), but it needs to be viewed in appropriate context. Panera is making several big investments to improve operations and store throughput, (Panera 2.0, etc.) , and CEO Ron Shaich says these investments will "stage future growth." At this point, the only reason to be really excited about this quarter is for tomorrow's (potential) profits. 

There were some other worrisome signs for the quarter. Same-store sales growth was essentially flat, at 0.1%, which Panera's management blamed on the weather. However, even amid the same conditions, a few restaurants have managed recent same-store sales growth that is inspiring. They tend to be the restaurants  with fans loyal enough to brave a snow storm; Chipotle, for instance, had massive  same-store sales growth, of 13.4% in their winter quarter. 

Panera fared better than Noodles & Co., which actually saw same-store sales decline 1.6% in the quarter. This shows the dichotomy within fast casual's recent growth; they're not all Chipotle (or B-Dubs, etc.), and both Panera and Noodles are proving to be places you end up eating at, rather than places you seek out. Panera is a fine restaurant, it's doing reasonably well, but it lacks that rabid following that will brave a snow storm for its food. This means it must have less; less pricing power, less growth, and ultimately (if you buy the stock) a lower valuation. 

Source: Panera Bread Co. 

What's next
Winter weather, long-term investments, all of Panera's excuses for a so-so quarter and weak guidance are reasonable. However, this is the second disappointing quarter in a row, blamed (in part) on weather; before that, bottlenecks in operations were an excuse. This restaurant has essentially under-performed for about a year, amid a myriad of excuses. 

CEO Ron Shaich deserves the benefit of the doubt, and I'm confident Panera will grow faster again. If you buy the stock here, make sure you're viewing it as a long-term investment, and that you're willing to wait for Shaich's investment's to pay off. Until the company produces some tangible in-store improvements, the stock will likely stay in neutral. 

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2938182, ~/Articles/ArticleHandler.aspx, 8/29/2015 5:13:57 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Adem Tahiri

Like what you've read? Subscribe to this feed for even more--free. I'm addicted to learning everything there is to know about retail stocks, consumer and labor trends, and behavioral finance; join me here and on twitter: @adem_tahiri I still believe that great investments are born when a strong business meets a game changing trend. Blog:

Today's Market

updated 19 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
CMG $721.20 Down -5.97 -0.82%
Chipotle Mexican G… CAPS Rating: ***
NDLS $11.89 Up +0.26 +2.24%
Noodles & Company CAPS Rating: **
PNRA $180.56 Up +0.06 +0.03%
Panera Bread CAPS Rating: ****