Panera Bread Co. (PNRA)
Q3 2009 Earnings Call Transcript
October 28, 2009 8:30 p.m. ET

Executives

Michele Harrison – Vice President, Investor Relations and Corporate Development
Ron Shaich – Chairman and Chief Executive Officer
Jeff Kip – Senior Vice President and Chief Financial Officer

Analysts

Steven Kron – Goldman Sachs
Jake Bartlett – Oppenheimer & Co.
Jason West – Deutsche Bank
Jeff Farmer – Jefferies & Company
Steven Rees – JPMorgan
John Glass – Morgan Stanley
Sharon Zackfia – William Blair & Company
Mitch Speiser – Buckingham Research
Bryan Elliott – Raymond James
Robert Derrington – Morgan Keegan
Nicole Miller – Piper Jaffray
David Tarantino – Robert W. Baird
Steve West – Stifel Nicolaus
Jeffrey Bernstein – Barclays Capital

Presentation

Operator

Good day, everyone and welcome to today’s Panera Bread Company 2009 Third Quarter Earnings Call. Today’s call is being recorded. At this time, I’d like to turn the call over to Michele Harrison. Please go ahead.

Michele Harrison

Thank you very much, [Audrey]. Good morning to everyone and welcome to Panera Bread’s third quarter earning call. My name is Michele Harrison, Panera’s Vice President of Investor Relations and Corporate Development. Here with me this morning is Ron Shaich, our Chairman and CEO, and Jeff Kip, our Senior Vice President and Chief Financial Officer.

Before we get started, let me cover a few regulatory matters. I’d like to note that during our opening remarks and in responses to your questions, certain items may be discussed which are not historical facts.

Any such items, including targeted 2009 results or conditions and details relating to 2009 and 2010 performance should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.

I’d like now to turn it over to Ron, who will kick off our call today.

Ron Shaich

Great, great. Good morning, folks. Thank you, Michele. Let’s get right to it. As you read last night, we reported earnings of $0.61, net of $0.04 of unexpected nonrecurring charges. The $0.65 of EPS before the nonrecurring charges is directly comparable to last year’s earnings of $0.45.

Essentially, our operating EPS is up 44% on a year-over-year basis. While for many investors, our strong EPS growth may be the thing that you’re focused on, we at Panera think the big news is comparable-store sales growth and the real transaction growth we are seeing. To be specific, company comps were up 3.3% in Q3.

In fact, in each period in Q3 company comps grew sequentially stronger. In July, company comps were up 2.6%, in August, comps were up 3% and September, comps were up 4.4%. Maybe of even greater significance to us is that company comps have been up 6.9% on a calendar basis in the first 27 days of Q4. Franchise comps, in addition, have kept pace and they were up 6.3% in the first 27 days of Q4.

But here in our judgment is what really matters. Q3 transaction growth was up 1.8% and Q4 to date transaction was up 3.2% on a calendar basis. Quite frankly, while we can’t expect transaction growth to continue at this torrid pace, we do think that this trend speaks to the strength of our business and the success of our strategy.

In fact, we challenge you to name another large restaurant operator with transactions as strong. As you may recall, over the last several quarters, Jeff and I have spoken to you about our commitment to invest in our business, to benefit the customer and to utilize the recession to build competitive advantage. In simple terms, our strategy’s been to put more on the plate for our guests, not less.

Folks, the strength of our earnings growth and the strength of our comp growth and in particular the strength of our transaction growth proves that our strategy is working. In a weak economic environment where few, if any, restaurant concepts are generating positive transaction growth, Panera’s significant transaction growth means we are delivering a better competitive alternative for our guests and it means we are taking market share and it is our view that this gain in market share will serve us particularly well as the economy begins to rebound.