Why Panera Bread Company’s same-store sales disappointed in 2Q14

Transaction and ticket

To get to the bottom of what drives same-store sales, we need to look at ticket and traffic. Ticket means the average check per customer transaction. Ticket is further driven by the price of items on the menu and by mix, which is the mix of products per transaction. Traffic means the number of customers that walk into Panera Bread Company (PNRA) and make a transaction.

Ticket

Ticket, or average check, declined by 0.3% compared to growth of 4.3% year-over-year (or YoY). This decline was primarily due to a 0.9% decline in mix. Price growth was 0.6%, which was down from 2.6% YoY.

According to management, the decline in average check YoY was due to an increase in breakfast transactions, which carried a lower average check compared to the dinner and lunch menus for the quarter.

The check also declined due to the company’s catering business—8% of Panera’s revenues—which has an average check of $135+. Growth for the catering business was slower than expected for the second quarter.

Traffic

Traffic grew to 0.4% from -0.5% YoY. According to management, this growth in traffic was due to several reasons, including;

  • Adding more labor hours to the restaurants
  • Upgrading equipment to handle the added capacity
  • Adding the Kitchen Display System, which improved operations at the restaurant level

According to the company, these additions improved the average production time by 30 seconds to a minute YoY.

Panera Bread Company competes with restaurant chains like Chipotle Mexican Grill (CMG), Noodles & Company (NDLS), and Fiesta Restaurant Group, Inc. (FRGI). Alternatively, you may also want to look at restaurants under the exchange-traded fund (or ETF) the Consumer Discretionary Select Sector SPDR Fund (XLY).

To grow ticket and traffic, a company has to continuously innovate its menu and be relevant to its audience. We’ll discuss this approach more in the next part of this series.