You could call me Panera Bread's (NASDAQ:PNRA) No. 1 fan -- as a consumer that is. Disappointing as it is, the company's operating performance has been somewhat stale over the years. And while the batch of third quarter earnings reported this week looked fresher, Panera still doesn't tingle my taste buds as an investor.

Revenue grew 15.4% with net income pacing right alongside at 15% as well, reaching $13.7 million, or $0.45 per share. Comps rose 3% at company-owned locations and 3.5% at franchise-operated cafes. However, this was achieved via a 6.5% hike in menu prices as transactions fell 3%.

The quarter certainly doesn't mirror the results of the Panera we've come to know. Over the past three years, annualized revenue and earnings growth have increased 29% and 7% respectively. As I highlighted earlier this year, the discrepancy stemmed from steadily falling margins and what I thought to be some serious mismanagement.

Thus, I was pleased to finally see the company address its margin problems extensively in the conference call. Management indicated it remains focused on driving higher gross profit per menu item with higher price points and introducing new higher margin products. The company already showed progress with its operating margin rising 130 basis points this quarter alone.

Still, one quarter's worth of improvement doesn't shake off my weariness of Panera's margin management abilities. The company implemented some hefty price increases that don't seem sustainable, particularly in an environment where value seems to trump quality. Hungry customers are seeking out bargains that can be had at fast food joints such as Wendy's (NYSE:WEN) and Burger King (NYSE:BKC) or simply not eating out at all.

Management sounded confident in its ability to reach the 23% to 25% earnings growth in 2008. I'm not so convinced. While the company has locked in its costs through 2009, I think the company will continue to see transaction growth fall, especially since further prices increases are in the forecast. And given that Panera's bottom line has grown just 12% so far this year when compared to the first nine months of 2007, the company is going to have to pull off one heck of stellar fourth quarter.

Even at what I consider some optimistic earnings estimates, Panera is selling at 19 times this year's expected earnings per share. In my mind, there are far better values in the foodservice space, such as McDonald's (NYSE:MCD) and Yum! Brands (NYSE:YUM). Those have the benefit of global scale, cater to recessionary wallets, and aren't in need of an operational turnaround smack dab in the middle of a global economic crisis.

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