Panera Bread Co. is making headway in its efforts to increase throughput at its 1,770 units, company executives said Wednesday, and the bakery-café brand is looking at more initiatives to increase capacity.
With warnings that weather in the first weeks of this year negatively impacted same-store sales, Panera executives updated analysts on their strategy announced in October to improve operations, including expanding employee hours by 35 or more a week at each bakery.
“As I look back at the last 16 weeks, I’m encouraged by the early traction we’re seeing,” Panera’s chairman Ron Shaich said, “although the positive trends in the first quarter are likely buried somewhere in the snow.”
Shaich said the St. Louis-based company is committed to its new strategic plan, which it has dubbed internally as “Panera 2.0.” The first steps were upgrading equipment, creating catering hubs and adding labor to the units.
He noted that Panera had improved capacity at about 75 percent of its company locations so far and is planning more changes.
“We are looking at a number of initiatives to drive the accuracy, customer-facing displays and the like,” Shaich said.
Shaich also noted that the company is working on an “end-to-end system that provides an enhanced order, payment, execution and consumption experience” that will be outlined in more detail at the company’s analyst meeting in Charlotte, N.C., on March 25.
The chain also plans to introduce new flatbread sandwiches in the spring, using bread reminiscent of Indian tandoori, and bold flavors, including Thai, Mediterranean and Southwestern chicken.
“Our flatbreads provide customers the option to choose their portion size, which supports the broader perception of value on our new menus,” he explained. “We believe this could also serve to open up a more robust snacking platform for Panera and add some muscle to our gathering place business, which runs across multiple departs.”
The flatbread platform also allows Panera the chance to tap into what Shaich said was growing interest in international and regional cuisines.
“We believe that they will resonate with a younger audience, particularly among Millennials and Gen-Xers,” he said.
Panera executives noted that same-store sales at company-owned bakery-cafés in the first 48 days of the first quarter fell about 2.2 percent after showing a 1.7-percent increase in the Dec. 31-ended fourth quarter.
“We think that January has been very tough for a lot of people,” Shaich said. “I think we’ll better understand our relative performance and what is really going on in the business as the snow melts and as we have a perception relatively on how we’re doing.”
Sharon Zackfia, an analyst with William Blair, said the company-store comparisons and a 250- to 300-basis-point penalty for weather were not surprising.
“We had projected first-quarter comps of roughly 1 percent, and consensus was at 2 percent, but those estimates will likely be coming down to something in the range of relatively flat given trends through the first half of the quarter,” Zackfia wrote in a note.
John Glass, an analyst with Morgan Stanley, said investors would weigh weather concerns against expected to benefits from Panera’s strategic initiatives. While “fixes for traffic may take longer than the Street believes,” Glass noted, he views the issues facing Panera “as temporary, not permanent.”
Panera Bread Co. reported on Monday that profit increased 5.1 percent in the Dec. 31-ended fourth quarter, with net income rising to $54.2 million, compared with $51.6 million in the prior-year period.
The company said systemwide same-store sales rose 1.1 percent during the quarter, with increases of 0.5 percent at franchised units and 1.7 percent at company-owned units. At company-owned units, Shaich said, same-store sales rose 1.9 percent in October, grew 3.7 percent in November and fell 0.4 percent in December.
“This rollercoaster ride extended into 2014,” he said. “January and the early part of February were characterized by days of comp growth generally consistent with the fourth quarter interspersed with days with dramatic negative comps as bad weather rolled through. In fact, seven of the 48 days in the first quarter to date had comps of negative 10 percent or greater.”
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