Photo Credit: samantha celera

Panera Bread (PNRA) Consumer Discretionary - Hotels, Restaurants, & Leisure  | Reports October 25, After Market Closes

Panera is prepared to release its third quarter results tomorrow after the market closes. The bread maker is coming off consecutive quarter beating on both the top and bottom line when its competitors have struggled. Revenue growth is still below seeing a marked deceleration that has investors worried about the state of the sector. Panera was the bellwether in the sector that only until recently wasn’t impacted by the broader draw down. Analysts are expected a slight pullback this quarter on the back of weak consumer spending and higher operating costs

The Estimize consensus is calling for earnings per share of $1.36 on $685.15 million in revenue, 4 cents higher than Wall Street on the bottom line and $3 million on the top. Compared to a year earlier that reflects a 6% increase in earnings and 3% in sales. Like earnings, shares have remained relatively flat, trading sideways for the majority of the year. Historically the stock tends to do the same immediately through the print to 30 days following a report. 

Panera has remained resilient in spite of a broader pullback in the fast casual sector. The bread maker remains dedicated to improving efficiency and quality to better meet its customers needs. This includes the recent move to only serve “Clean” bacon as opposed to what is found at McDonald’s. “Clean” simply insists that food doesn’t contain artificial ingredients while also shedding some light on the standards that Panera holds themselves too.

Meanwhile the continued rollout of Panera 2.0, frequent menu innovations and new store designs have started to yield positive results. With stores running now running more efficiently, we have started to see sales edge higher. However these new initiatives come at a cost to profitability. Converting every store to the new system along with renovations and rising wages certainly takes its toll on margins. On top of this consumer spending in the U.S. continues to trend down, putting pressure on traffic and comps for the quarter.