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    MARKET EDGES

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Panera’s ability to drive same-restaurant sales via mix has ebbed and flowed over the past few years.

We are going to be posting on PNRA more regularly going forward.  The company has no real competition but we believe that 2013 same-restaurant sales targets could be difficult to achieve in light of a challenging operating environment in which to maintain sufficient average check growth.

Panera’s company same-restaurant sales growth has become increasingly dependent on price and mix over the past few quarters.  Our fear for shareholders, at this point, is that management’s ability to sustain mix is waning and that meeting FY13 comparable sales growth guidance may prove difficult. 

During the 4Q11 earnings call, management broke out components of FY12 SSS guidance; during the 4Q12 earnings call, the same detail was not provided for FY13.  That management provided less detail is not a good sign, in our view.  We think that the outlook for mix growth is negative for Panera:

  • The company is lapping the positive mix impact of higher sales of salads in 1Q12, which were boosted by warm weather.  Guidance for 1Q12 mix growth was expected to be primarily catering-driven.
  • Management is planning on raising prices 2-3% in 2013 with a total comparable sales growth target of 4.5-5.5%.   We believe that there is high risk of mix growth turning negative in the first couple of quarters of 2013.  With traffic growth decelerating as average check growth has accelerated, we believe 1H13 could be difficult for PNRA.
  • Catering sales growth, while still impressive, has been decelerating and we expect that deceleration to continue as the initiative becomes a larger portion of PNRA’s total sales.  

PNRA MIX TAPPED OUT? - pnra sss components

Howard Penney

Managing Director

Rory Green

Senior Analyst