Panera Bread’s Same-Store Sales Are Weakening
An Investor's Guide To Panera Bread (Part 5 of 15)
Revenue driver
In the last few parts of this series, we learned that Panera Bread (PNRA) experienced double-digit revenue growth over the past ten years. In contrast, restaurants like McDonald’s (MCD) and Yum! Brands (YUM) grew at a CAGR (compound annual growth rate) of only 3.2% and 3.7%, respectively.
Why look at same-store sales?
To understand what drives revenues, we need to look at the most important value driver—same-store sales. Investors watch same-store sales to check the health of their investments in restaurants and retail stocks—like Nike (NKE) and Gap (GPS).
To invest in several restaurants you can consider a broader portfolio like the SPDR S&P 500 ETF (SPY).
Most of the company’s activities include, but aren’t limited to:
reinventing the menu
remodeling stores
driving more digital strategy—like promotions through apps
loyalty and reward cards
advertising
marketing
The company’s activities revolve around the effort to entice more customers to walk through their doors. More customers would increase sales.
Low correlation with sales
The above chart compares the same-store sales growth with revenue growth. We can see that they don’t move together. They have a low correlation of 0.17. Same-store sales in the first three quarters were almost flat. To learn more about PNRA’s third quarter earnings, read Why Panera Bread’s 3Q14 earnings fail to impress.
The above chart also compares revenue growth with unit growth. A restaurant’s revenues also grow when it adds more units. We’ll discuss unit growth in more detail later in this series. In the next part of this series, we’ll discuss why PNRA’s same-store sales failed to impress.
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