Why Panera’s 2Q15 Earnings Call Was All about Panera 2.0



Key initiatives

Previously in this series, we mentioned that Panera’s (PNRA) investors are focusing on more important growth initiatives at the company. Panera 2.0 is one of the key initiatives that has kept investors hooked on the stock.

Panera operates restaurants under the fast-casual format, which has performed well recently. Companies such as Chipotle Mexican Grill (CMG) and Shake Shack (SHAK) have thrived. Since 2012, CMG has returned almost 107% but Panera has returned only 21%. Over this period, even the S&P 500 has fared better, returning about 58%. The Consumer Discretionary Select Sector SPDR Fund’s (XLY) portfolio is 1.5% Yum! Brands (YUM) and 0.3% Darden (DRI).

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Revenue drivers

Panera’s lackluster stock performance was a result of decelerating revenue growth, which is plotted in the chart above. Driving this revenue growth are same-store sales growth and restaurant expansion. Same-store sales growth means the year-over-year growth in the number of people visiting and spending at the restaurant. Restaurant expansion means adding more units.

Of the above two drivers, same-store sales growth, or comps, is more critical for Panera. During the recent earnings call, management stated, “We view comps as a leading indicator of the success of our strategic initiatives.” So, when you look at Panera’s same-store sales growth in the chart above, you’ll see that same-store sales growth has been weakening since 2012, affecting revenue growth.

This is where Panera 2.0 comes into the picture. Panera 2.0 is a strategic initiative geared towards increasing revenue growth by increasing same-store sales growth at Panera Bread locations. So what exactly is Panera 2.0? Read on to the next part of this series.


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