For a long time, I've found
Panera (Nasdaq: PNRA) unpalatable. I even
nominated it as the
Worst Stock for 2009. However, recent news suggests that
my attitude toward shares of the bakery cafe chain was in
poor taste.
Panera's third-quarter net income increased 38%, to $19
million, or $0.61 per share. Revenue increased 6%, to $335
million, and company-owned same-restaurant sales increased by
3.3%.
Some of Panera's sales success was due to price hikes on
its menu; although the average check increased by 1.5%,
Panera boosted menu prices by 2.2%. I've often complained
that Panera has used higher prices to pump up its fortunes,
instead of generating real traffic growth. But this quarter,
the chain was able to achieve 1.8% more transactions year
over year.
I'm also impressed that Panera was able to increase
same-store sales growth and customer traffic in the third
quarter;
last quarter, those figures still left something to be
desired. Panera also released guidance for next year,
projecting a 14%-18% increase in earnings per share.
Perhaps the bakery cafe can do just fine in the current
environment. I wouldn't be surprised if reasonably priced,
high-quality restaurants such as Panera and
Chipotle (NYSE: CMG) (NYSE: CMG-B) continue
to tempt budget-conscious customers away from more expensive
restaurants such as
Cheesecake Factory (Nasdaq: CAKE) and
Ruth's Hospitality (Nasdaq: RUTH).
Frugality's pretty hip these days, after all.
I'm still a bit leery of the stock, and
consumers remain skittishin general. Personally, a stock
like
McDonald's (NYSE: MCD) strikes me as less
risky right now, given its operational success, dividend
yield, and lower multiple than many restaurant peers.
However, Panera is displaying admirable evidence that it can
get customers in the doors despite the economic crunch. In my
opinion, that's some admirably fresh news for Panera's
investment thesis.
This article was originally published as
Panera: Fresher Than Ever?on
Fool.com
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