Panera Mixed Guidance Scored A Win (PNRA)

Panera Bread Company (NASDAQ: PNRA) is issuing some mixed guidance this morning, although shares are reacting favorably to the news.  The company is increasing its second quarter 2008 earnings per diluted share target to $0.48 to $0.50.  Its prior guidance was $0.40 to $0.44, and First Call had estimates at $0.42 EPS. The increase is from same stores sales growth of 6.1% to 6.4% rather than a previously targeted range of 5% to 6%.  It is also seeing a better than expected margin improvement on higher growth in gross profit per transaction.

This isn’t universal though.  Panera also noted that the continuing rise in gas prices will generate an incremental $0.02 to $0.03 negative impact on earnings per share for the second half of 2008, which it will update in its earnings report to be released on July 22, 2008.

It has employed some hedging strategies, although only for a limited time period.  Panera has locked in approximately 95% of its fiscal first and second quarter 2009 wheat requirements at a total cost of approximately $10.00 per bushel versus the approximately $15.00 per bushel paid for the same period in 2008. Panera HAS NOT locked its requirements for the third and fourth fiscal quarters of 2009, as it noted that suppliers are not offering commitments on basis for that time period. It does expect to benefit from the year-over-year decrease in wheat costs in 2009, but also notes that part of that benefit will be offset by higher commodity costs in proteins, dairy, packaging, and the increasing cost of gasoline.

Shares closed at $45.46 yesterday and shares are up over 7% at $48.94 in pre-market trading with 45 minutes to the open.  The 52-week trading range is $30.60 to $53.45.

Jon C. Ogg
June 18, 2008