I nominated Panera Bread
First-quarter net income did increase by an impressive 40%, to $17.4 million, or $0.57 per share. Net sales increased a far more modest 5%, to $320.7 million, and same-store sales increased a mere 0.7%. The unimpressive comps even included a positive bump from Easter's calendar shift; without Easter, they would have been flat.
Alas, Panera's traffic continues to wane, although price increases have helped make up for that. At company-owned stores, the comps figure included a transaction decline of 1.6%, while average check growth was 1.9%. Panera's move to boost comps by raising menu prices has been a red flag for months now, although restaurant peer Chipotle Mexican Grill
Meanwhile, Panera reiterated guidance for the year, and it expects to increase earnings per share by 15% to 22%, compared to last year's 24% EPS growth. So depending on where 2009 numbers end up falling, Panera's earnings growth could slow considerably.
Panera's stock has been a popular performer for quite some time now, despite the doubts of folks like me; however, Panera bullishness may be about to hit the wall of reality. On the other hand, I've also noticed that many restaurant stocks have surged lately -- over the last three months, Cheesecake Factory
However, with continued high unemployment and consumers who are likely to watch their wallets for quite some time, I have to wonder whether investors' eyes are bigger than their stomachs with regard to many restaurant stocks; on this particular menu, I think it pays to be picky. As far as Panera goes, I see enough troubling signals to suspect that investors should just skip the bread.
Related Foolishness is bigger than a breadbasket:
Chipotle Mexican Grill is a Motley Fool Rule Breakers pick and a Motley Fool Hidden Gems selection, and the Fool owns shares of it. Carve out a slice of any of our Foolish newsletters today, free for 30 days.