Panera Bread (PNRA) Turnaround Taking Shape - Jefferies

Jefferies analyst, Alexander Slagle, sees the turnaround at Panera Bread (NASDAQ: PNRA) taking shape as SSS were better than expected & cafe margins expanded Y/Y for the first time since 2012. No change to Buy rating but the PT will be addressed after the earnings call at 8:30.

Q1 SSS of 6.2% beat consensus of 5.3% as check growth of 3.8% and traffic of 2.4% were both ahead of expectations. Q1 SSS and traffic represented PNRA’s best performance in 4 years, and was the most significant margin of outperformance they have ever recorded against the BlackBox industry index. SSS during the first 27 days of 2Q are trending up 4.4% vs 2Q consensus of 4.2%. Recent SSS and traffic trends suggest that 2.0 & operational integrity initiatives being put in place at company stores are moving the needle;

EPS $1.56 (+11% Y/Y) vs. consensus of $1.50-1.51 as restaurant margins came in at 16.7%, up 20bps Y/Y on lower COGS & occupancy costs, offsetting higher labor and restaurant operating expenses. With commodity costs likely to remain benign, and pricing to be in the 2.5% range for much of the year, they suspect PNRA can turn the tide on margins this year and set up to see further leverage emerge in ’17 as it potentially sees 2.0 investment cost headwinds ease further and SSS accelerate.

Full year 2016 operating EPS guide raised to +5-8% or $6.50-6.70 (from +2-5% or $6.33-$6.52), as SSS are coming in ahead of expectations and the team appears to be making better progress on margins. PNRA now sees SSS of 4-5% (from 3.5-4.5%), and reiterated the remaining components of its annual guidance.

For an analyst ratings summary and ratings history on Panera Bread click here. For more ratings news on Panera Bread click here.

Shares of Panera Bread closed at $212.47 yesterday.

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