Panera rallies on earnngs outlook
Written on February 14, 2008
Panera Bread Co. shares surged 8 percent Wednesday after the company reported a better-than-expected fourth quarter and projected fiscal 2008 profits above analysts’ estimates.
Although the Richmond Heights-based bakery cafe company reported earnings declined in the fourth quarter, it also said the results exceeded its targets. In addition, a 2.5 percent price increase instituted in November had no noticeable impact on transaction growth despite customers’ concerns over a weakening economy, according to a company statement.
Panera said it expects to earn between $2 and $2.11 per share for fiscal 2008. Five analysts surveyed by Bloomberg estimated $1.97 on average. The company also said it was narrowing its per-share growth target for 2008 to a range of 12 percent and 18 percent from the previous range of 10 percent and 20 percent. To meet its fiscal earnings target, Panera said it will need to raise prices by about 5 percent this year and is dropping its once touted Crispani pizza product.
Although the company had once believed Crispani would help boost evening traffic, it was not as popular as Panera had hoped. It also was expensive to make instant payday advance. Panera’s fourth-quarter earnings included a charge related to the discontinuation of the Crispani product line.
Given the difficult consumer environment and the impact of higher prices, Paneral said it is "conservatively" assuming a 2.5 percent to 3.5 percent company-owned bakery-cafe sales growth in 2008.
Rapidly rising wheat costs also will have a significant impact on Panera this year, the company said. However, it said it is ready to make price adjustments to lessen the impact of a run-up in wheat costs.
"We face several significant challenges as we take on the new year: unprecedented inflation in the wheat markets, executing appropriate pricing adjustments and an uncertain consumer environment," Ron Shaich, chairman and chief executive, said in a statement. "But despite these, we are very optimistic about 2008."
gappleson@post-dispatch.com | 314-340-8331
Filed in: management.