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alstry (35.96)

PNRA-Postive or Negative Updated Guidance

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June 17, 2008 – Comments (3)

The first part of the release states:

ST. LOUIS, June 17 /PRNewswire-FirstCall/ -- Panera Bread Company (Nasdaq: PNRA - News) today announced that it is increasing its fiscal second quarter 2008 earnings per diluted share target to $0.48 to $0.50 from its previously announced target of $0.40 to $0.44 per diluted share. The increase is driven by projected company-owned comparable bakery-cafe sales growth of 6.1% to 6.4% (versus its previously targeted range of 5% to 6%), and better than expected margin improvement on higher growth in gross profit per transaction.

But it goes on to state:

The Company also announced that with the continuing rise in gasoline prices, the Company expects an incremental $(0.02) to $(0.03) per diluted share of negative impact on the previously announced earnings per diluted share target range for the second half of 2008.

This is very interesting....on its face things look really good, earnings are going to beat in Q2 by about $0.08 cents per share.  Not only that, revenues are better than expected.....very good results in the current environment.

However, what is really interesting is that they are lowering 2nd half earnings guidance already due to rising gasoline prices.  What is not mentioned is second half revenues.  You would think if revenue trends were still trending positive, they would also raise second half revenue estimates.

Based on the fact that they beat by so much in Q2, and they are lowering for the second half.......sales and margins seem to be deteriorating from the beginning of the quarter to the end.

Further, the company seems to be concerned about rising commodity prices going forward.  Clearly the performance in Q2 was very good.....but like many other businesses, the second half seems to be a challenge.

3 Comments – Post Your Own

#1) On June 17, 2008 at 11:29 PM, DemonDoug (34.47) wrote:

i don't see how pnra is doing well in this environment.  it seems like they would be the type of eatery that would be contracting along with everyone else; the winners i see would be yum brands and mcd's, the cheapest stuff around.  I actually like Panera, but I kind of see them like starbucks and whole foods - higher price for higher quality.  You could probably go down to a regular restaurant for the same price of panera.

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#2) On June 18, 2008 at 12:20 AM, alstry (35.96) wrote:

I agree.  My guess is that they really worked hard to generate revenues in the early part of the quarter.  Based on the nature of the wording of the press release, the second half could be very difficult.

They are already adjusting net NEGATIVE in a exceptionally profitable quarter....how the hell do you do that unless you are sucking wind going into the end of the quarter?

Based on my channel checks, the casual dining segment is facing serious trouble.

You will likely see three major restaurant restructurings before the summor is out.

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#3) On June 18, 2008 at 7:50 AM, alstry (35.96) wrote:

I think we can all agree the 6% rise in comps is a fantastic achievement in the current environment.

However, if that was a continuing trend, you would have thought they would have increased future comp revenue projections as well. Clearly conditions seem to be deteriorating as we end the quarter.

Based on the way the press release was worded, all we know is rising gas prices are having a strong impact on the bottom line as earnings will be down a NET negative from earlier projections, NOT the current numbers.....

therefore one can extrapolate that high gas prices are hitting top line numbers as well.

At this point, the question is how hard have numbers been hit recently due to rising gas prices??

For some evidence of consumer slowing, here is CarMax's statement this morning:

“Our first quarter sales were modestly below expectations and earnings were disappointing,” said Folliard. “Sales slowed through the quarter, and since Memorial Day weekend, traffic and sales weakened further. If the current trends persist, results for the full year could be significantly below the bottom of our original earnings guidance range. As a result of the combination of the uncertain economic conditions, rising fuel and food costs and weak consumer sentiment, exacerbated by the rapid depreciation in SUVs and trucks, we are temporarily suspending guidance on comparable store sales and earnings for fiscal 2009.

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