This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Panera Bread Co. (PNRA) on February 12, 2009.
Management:
Chairman and CEO: Ronald M. Shaich
SVP and CFO: Jeffrey W. Kip
VP of IR: Michele Harrison
Key Investor Issues:
- Full year net income of $67 million or $2.22 versus $57 million or $1.59.
- Q4 operating profit firmed 35% over Q4 of 2007 on revenue growth of 19%.
- Fiscal 2009 EPS target reaffirmed at $2.25 to $2.71, up 15% to 22% versus 2008.
Fourth Quarter Financial Highlights:
The fourth quarter diluted EPS of 84 cents and the full year EPS of $2.22 represent year-over-year growth of 50% for the quarter and 24% for the full year.
- Exclusive of the charges for the quarter, the quarter would have grown 55%.
- Fourth quarter operating profit grew by 35% to $41.7 million and operating margin expanded 130 basis points from 10.3% to 11.6%.
- For the full year operating profit grew 26% versus the prior year to $112.7 million and operating margin improved 30 basis points from 8.4% to 8.7%.
The Q4 revenue increased 19% to $358 million versus $301 million in the comparable period for 2007.
- Net bakery café sales grew 18% to $303 million in the fourth quarter and comprised about 85% of total revenues.
- Net bakery café sales for the full year 2008 grew 23.6% versus 2007 to $1.1 billion.
- The increase was driven by comp store sales growth and bakery cafes opened in the trailing 12 months and the impact of the 53rd week.
- The impact to the extra week was 6.8% of sales growth for the quarter and about 2% of sales growth for the full year.
The company opened 32 new bakery cafes during the fourth quarter.
- Eight of these were company owned stores and 24 were franchise operated including the first two stores in Canada.
- Fourth quarter AWS for new units opened in 2008 grew 6% versus the prior year to $36,943.
- For the full year, new unit average weekly sales finished at $36,694 and in line with the target of $36,000 to $38,000 for the year.
The company owned comp store sales growth for Q4 2008 which was 14 weeks versus Q4 of 2007 which was 13 weeks firmed 9.8% on a fiscal basis.
- The management reported that an estimated 7.9% was a result of the extra week.
- On an apples-to-apples basis, comp sales for the 14 weeks of Q4 2008 versus the corresponding 14 weeks of 2007, being the 13 weeks of Q4 2007 plus the first week of the Q1 2008, grew 1.9%.
- The components of Q4 company comps of 1.9% included about 6.1% of price, approximately 100 basis points of negative mix impact and negative transaction growth of -3.2%.
- The management estimates the impact from severe weather in December on Q4 transactions and comp growth to be approximately 80 basis points negative.
- Collectively, comp growth excluding weather impact was nearly 2.7% in the fourth quarter.
- The core transaction growth netting out the weather impact was -2.4%.
The franchisees experienced similar sales growth in the fourth quarter driven by comp stores sales growth and new store openings in the trailing 12 months.
- Franchise operated sales growth drove royalty revenue and fees up 19.8% to $21 million for the quarter and 11.3% to $75 million for the year.
- Franchise comp sales grew 10.7% on a fiscal basis for the 14 weeks of Q4 2008 versus the 13 weeks of Q4 2007 and 5.3% for the 53 weeks of fiscal 2008 versus the 52 weeks of fiscal 2007.
- Adjusting for the extra week, franchise comp store sales grew 3.3% for the 14 weeks in Q4 2008 versus the corresponding 14 weeks of 2007, which is the 13 weeks for Q4 2007 plus the first week of 2008 and 3.4% for 53 weeks versus the corresponding 53 weeks of 2007.
- The system wide comparable bakery café sales growth was 2.7% for the 14 weeks of the fourth quarter of 2008 versus the comparable 14 weeks of 2007.
Fresh dough sales to franchisees grew 24% to $33.7 million in the fourth quarter including about a 2.1% impact for the extra operating week.
- As a percent of total sales, fresh dough sales to franchisees were 9.4%.
- This represents an increase of 30 basis points year-over-year.
Bakery café operating profit dollars increased 21.6% in Q4 and restaurant margin as a percent of sales improved by 50 basis points year-over-year driven by the company’s margin improvement initiatives.
- Within restaurant, margin cost of food and paper was favorable by seven basis points year-over-year.
- This reflects approximately 150 basis points of benefit from category management initiatives offset by about 80 basis points in wheat inflation.
- The cost of labor remained flat as a percentage of sales.
- The Q4 fresh dough cost of sales to franchisees improved 360 basis points as dough prices fully offset wheat costs increases in the quarter.
G&A expenses as a percent of revenues were up 60 basis points in the fourth quarter versus the prior year.
- The increase was both due to the legal settlement accruals and higher corporate bonuses in 2008 versus a year ago when minimal or no bonuses were paid out.
- For the full year, G&A expenses as a percent of revenue were essentially flat year-over-year.
- The fourth quarter effective tax rate was approximately 37.5% versus 40% for the year ago period when higher tax expenses were driven by a FIN 48 tax reserve.
