Panera Bread: third quarter 2010 earnings report

St. Louis / MO. (pbc) Panera Bread Company reported net income of 23 million USD, or 0,75 USD per diluted share, for the third quarter ended September 28, 2010. The Q3/2010 results compare to net income of 19 million USD, or 0,61 USD per diluted share, for the third quarter ended September 29, 2009, and represent a 23 percent year-over-year increase in diluted earnings per share. Highlights:

• Company-owned new bakery-cafe AWS increased to 40’950 USD YTD versus 37’068 USD in 2009
• Acquired 37 bakery-cafes from New Jersey franchisee, accretive in 2011
• Q3/2010 share repurchase totaled 79 million USD lifting EPS by 0,01 USD for the quarter
• Q4/2010 EPS target raised to 1,15 USD to 1,17 USD (up 21 percent to 23 percent)
• Full Year 2010 EPS target increased to 3,57 USD to 3,59 USD (up 28 percent to 29 percent)
• Full Year 2011 EPS target set at 4,30 USD to 4,35 USD (up 20 percent to 22 percent)

For the thirty-nine weeks ended September 28, 2010, net income was 75 million USD, or 2,42 USD per diluted share. These results compare to net income of 56 million USD, or 1,82 USD per diluted share, for the thirty-nine weeks ended September 29, 2009, and represent a 33 percent year-over-year increase in diluted earnings per share.

Third Quarter Fiscal 2010 Results and Business Review

Comparable Bakery-Cafe Sales Growth: In the third quarter of fiscal 2010, system-wide comparable bakery-cafe sales increased 6,9 percent, Company-owned comparable bakery-cafe sales increased 5,5 percent, and franchise-operated comparable bakery-cafe sales increased 7,9 percent versus the comparable period in fiscal 2009. Two year system-wide comparable bakery-cafe sales increased 9,6 percent, two year Company-owned comparable bakery-cafe sales increased 8,7 percent and two year franchise-operated comparable bakery-cafe sales increased 10,3 percent.

The Company-owned comparable bakery-cafe sales increase of 5,5 percent in the third quarter of fiscal 2010 included the following year-over-year components: transaction growth of 0,2 percent and average check growth of 5,3 percent. Average check growth in turn was comprised of retail price increases of approximately 2,0 percent and mix impact of approximately 3,3 percent.

Operating Margin: In the third quarter of fiscal 2010, the Company generated operating margin improvement of approximately 20 basis points compared to the third quarter of fiscal 2009. The current fiscal quarter results included approximately 80 basis points of expense related to the rollout of the Company´s new MyPaneraTM loyalty program.

Capital Deployment: During the third quarter of fiscal 2010, the Company opened ten new bakery-cafes and its franchisees opened twelve new bakery-cafes. As a result, there are now 1’421 bakery-cafes open system-wide as of September 28, 2010.

Average weekly sales (AWS) for Company-owned new units year-to-date through the third quarter of fiscal 2010 was 40’950 USD compared to 37’068 USD in the same period of fiscal 2009. AWS for Company-owned new units in the third quarter of fiscal 2010 was 39’990 USD compared to 36’930 USD in the third quarter of fiscal 2009. AWS for franchise-operated new units year-to-date through the third quarter of fiscal 2010 was 37’719 USD compared to 35’680 USD in the same period of fiscal 2009. AWS for franchise-operated new units in the third quarter of fiscal 2010 was 36’643 USD compared to 35’133 USD in the third quarter of fiscal 2009.

On September 29, 2010, the Company completed the purchase of substantially all the assets and certain liabilities of 37 bakery-cafes owned by its New Jersey franchisee. The Company´s results for the third quarter of fiscal 2010 were not impacted by the purchase as the acquisition was completed following the close of the quarter.

During the third quarter of fiscal 2010, the Company repurchased 1’007’984 shares at an average share price of 78,51 USD. The share buyback had a favorable impact of 0,01 USD on the Company´s third quarter earnings per diluted share. To date, the Company has repurchased a total of 1’932’969 shares under the program for an aggregate purchase price of approximately 152 million USD, which represents a year-to-date impact of 0,04 USD per diluted share. The Company has approximately 448 million USD available under the existing 600 million USD repurchase authorization.

Fourth Quarter 2010 Outlook

For the fourth quarter of fiscal 2010, the Company is raising its target for earnings per diluted share to 1,15 USD to 1,17 USD versus 0,95 USD per diluted share in the fourth quarter of fiscal 2009 based on 0,03 USD accretion from shares repurchased since the second quarter earnings call and 0,01 USD impact from an improved operating margin outlook. This earnings per diluted share target does not assume any additional share buyback. The Company expects the acquisition of its New Jersey bakery-cafes to have only minimal impact on its fourth quarter earnings as a result of integration and transaction costs associated with the acquisition. If the Company meets its 1,15 USD to 1,17 USD target, diluted earnings per share will grow 21 percent to 23 percent in the fourth quarter of fiscal 2010 versus the comparable period in fiscal 2009.

Full Year Fiscal 2010 Targets

The Company is raising its full year earnings per diluted share target to 3,57 USD to 3,59 USD based on its third quarter of fiscal 2010 performance and the impact of its share repurchases since the second quarter earnings call. If the Company meets its target, it would generate diluted earnings per share growth of 28 percent to 29 percent in fiscal 2010.

Info: Panera Bread Reports Q3/2010 diluted EPS of 0,75 USD, up 23 percent over Q3/2009, on 6,9 percent Growth in System-Wide Comparable Bakery-Cafe Sales – complete press release (PDF; 13 pages).