Panera's Sales Rising On New Products, Catering

NEW YORK (January 20, 2010 - Dow Jones)—Panera Bread Co.'s (PNRA) fourth-quarter sales grew on stronger sales during all parts of the day, helped by new products added throughout the year, a rebounded catering business and avoiding cutting jobs, Ron Shaich, the chain's chairman and chief executive, said.

The initiatives paid off with a 7.4% increase in same-store sales at Panera's company-owned stores for the fourth-quarter on a calendar basis and 9.4% jump in January so far, a "performance better than we imagined ourselves," Shaich said in an interview Thursday, a day after the company raised its fourth-quarter earnings target.

"We made a series of smart bets in a number of different things and they actually worked," said Shaich, who is relinquishing his title as CEO in May and becoming executive chairman.

Customer-traffic grew between 3% and 4% during the period, Shaich said, as the company was able to attract more new customers than ones that may have checked out during the recession.

Panera's industry-leading numbers sent its shares up $5, or 7.3%, in recent trading to $73.39, after earlier hitting $73.95, the highest level since May 2006. The broader market, meanwhile, slumped, with the Dow Jones Industrial Average off 1.9% and the S&P 500 index losing 1.6%.

Panera, which expects fourth-quarter earnings between 94 cents and 95 cents, said part of the dramatic sales lift comes as the chain laps "moderately retarded" same-store sales results in the wake of the late 2009 financial meltdown.

Still, Panera has introduced new coffee, breakfast sandwiches and salads, plus items like macaroni and cheese, throughout the year that helped drive more visits. Shaich also attributes his chain's resilience, at a time when most restaurants have struggled, to keeping portions full and avoiding cutting employee hours.

Panera also caters to a more affluent customer that appears unwilling to cut down on visits. "I just don't think that Panera was on the list of 100 items that will help them to deleverage and [toward] fiscal security," Shaich said.

Panera's catering business has been getting a big lift of late, with sales up about 15% in the fourth-quarter and about 20% so far in January, Shaich said, as corporations have loosened their purse strings a bit.

Analysts say Panera still has more opportunities to grow sales as it plans to advertise more and continue to roll out new products, like a salmon salad.

Panera will soon expand its test of a loyalty program to four markets. Rather than provide discounts, Shaich said the goal of the loyalty program is to "surprise and delight" customers by inviting them to special events like baking bread or to try new products.

"It's about building the relationship," Shaich said. The program, which comes at no cost to the customer, is being developed with the consulting firm dunnhumby.

Shaich said Panera is "always looking at any opportunities" at acquisitions, but sees opening new company stores as providing the best return for investors, especially with occupancy and construction costs down 25% and 20%, respectively, on stores opened in 2009.

-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; paul.ziobro@dowjones.com


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