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Panera Bread Company Message Board

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  • hotpanera2 hotpanera2 Jun 16, 2003 2:47 PM Flag

    Just listened to the PNRA webcast�

    Ron expressly did not predict how many stores Pnra will ultimately have. He simply pointed out that in various cities which he listed, Pnra has comfortably exceeded the original assumption of 1 store per 150-175 K people. It is for each investor to decide if Columbus, St. Louis and Chicago have special circumstances, or whether their density -- which is factual -- can be duplicated generally. Ron gave no view about that and said clearly that he doesn't know how large Pnra will ultimately be. As for margins, he pointed out that over the past few quarters, margins have been increasing due to various efficiencies. He sees further room for margin improvement as the store count increases (lowers general overhead per store) and as each commissary serves more stores. To assume some growth in sales over the next 5 years, is also not hype IMHO. It is reasonable that the delivery initiative alone will increase sales. I think you are confusing Ron's genuine passion with hype. He has never over-promosed in the past and fully understands what "missing" would mean. There are no guarantees, but I find the projection to be optimistic but not unreasonable.

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    • No hype huh? Come on Hot Panera, be real.

      I know you well enough to know that you did not fall for the purported "news" Ron was feeding in the webcast.

      First -- 20% growth in stores for the next 3-5 years. That is no big deal. Right now, with over 500 store, Panera needs 100 new stores to hit 20%. Their recent pace, however, has been 120 stores per year. Next year, with over 600 stores, Panera will only need 120 stores to hit the 20%. In the third year, Panera will need 140-150 stores to hit this mark. Ron knows that if he misses in three years, no one will remember what he said in this webcast.

      The true point is that it will not be easy to increase the numbers of openings each year without a degradation in the quality of the new stores and their performance. By predicting a number lower than expected (and announced as a target) for the next two years, Ron says something which sounds great but which is really no big deal -- and not even a small deal.

      As far as the 30% growth in earnings is concerned -- only time will tell. The growth is not going to come from growing same store sales unless Panera's performance picks up greatly in the near term. As you know, same store sales are down for the year so far. Not the month, DOWN FOR THE YEAR! We will have to see how period 6 comes out. I am sure that if sales are not up, Ron will tell us about rain on Memorial Day weekend in Ohio -- you will probably post a link to the National Weather Service to back it up.

      Remember, an increase in stores of 20% does not translate into 20% higher profit. In the near term, a bigger percentage of the new stores are scheduled to be franchises when compared to the existing mix. This means that Panera only gets its license fee and not the full profit on the stores. I do not believe that "margin" increases will be able to overcome this.

      My suggestion is that we all watch to see if Ron is still selling his stock. If he is, then it is time to head for the hills on this one. After all, why would Ron sell his stock in a company that is going to have 30% earnings growth each year for the next 5? With compaounding, that is a tripling of EPS in 5 years. Even if the multiple falls somewhat, Why sell now if the stock will be at 2.5 times current value in 5 years. And don't tell us about how Ron is diversifying his portfolio! That excuse of yours got pretty thin once Ron sold a huge chunk of is stock in Panera over the last year plus.

      • 2 Replies to freshbread4u
      • Your clarity, thoughtfulness, and analytical ability are so right on, it's downright scary. Hopefully one day we can meet........

        Count me as a Recommender -- especially about the selling part. Of course I think Shaich & Gang have already tipped their hands (thank goodness for Depression-era regulations), but it will be interesting as always where we go FROM HERE......Good luck to all.....

      • Fresh-I don't follow you completely. I think you are right when you say the stated goal in expansion of stores is very achievable. For stores to expand 20% per year for say four years-starting with 500 stores at the end of the first year you would have 600 stores, the 2nd year 720 stores, the 3rd year 860 stores, and at the end of the fourth year you would have 1030 stores. So in four years, Panera would open around 430 stores. This should be no problem-the quality of the franchisees has stayed high in the past with this kind of expansion. Why not in the next four years.
        Averaging 30% increase in earnings for say four years could easily occur. Even if the first years' earnings increase would lower to 33%, the next 3 years could be 31%, 29% and 27% to achieve a four year 30% average.
        Of course there is hype in presenting Panera to mutual funds, but the numbers are very believable-to me they are as likely understated as overstated.

        Wrench

    • You actually make me sick. You wouldn't know hype if it bit you on the arse! Weisel is a hypster-machine ala Montgomery Secutities, from which it came. How MANY times have I seen what is about to happen. Some are prepared, some sadly, are not. Some are pathetically blind........Good luck to all....

 
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