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Higher prices help Panera boost 3rd-Q profit

ST. LOUIS With increased menu prices, a focus on higher-profit offerings and the discontinuation of the chain’s failed Crispani pizza line, Panera Bread Co. succeeded at what many restaurant companies have failed to do in this latest quarter: post increased profit, margins and revenues.

For the third quarter ended Sept. 25, Panera posted a 15-percent increase in net income, to $13.7 million, or 45 cents per share, compared with year-ago earnings of $11.9 million, or 37 cents per share. The company’s operating profit rose 41 percent to $22.7 million, it reported, despite what it called significant inflation in core commodities, like wheat, and considerable consumer headwinds. Operating margins rose 130 basis points, or 1.3 percent, from last year, reported Panera, which operates or franchises 1,294 bakery-cafes.

To offset the economic factors, Panera said it increased prices as much as 6.5 percent and worked to increase the gross profit per transaction, especially as year-to-year traffic counts continue to decline. The chain’s discontinuation of its Crispani flat-bread pizza -- which did not meet sales goals, increased operating costs and was cut earlier this year -- also helped to improve unit-level margins, the company said.

Third quarter same-store sales increased 3.0 percent at corporate bakery-cafes and 3.5 percent at franchised locations. The result at corporate restaurants reflected an average price increase of 6.5 percent and a drop in traffic of 3.2 percent, the company reported.

Total revenue rose 15 percent to $315.2 million, reflecting the positive same-store sales and the opening of 24 restaurants during the quarter.

The company reaffirmed its per-share profit target for the fourth quarter, which is set at between 82 cents and 86 cents, compared with earnings of 56 cents per share in the year-ago fourth quarter. The company noted that its price of wheat is projected to total $12.00 per bushel in the fourth quarter, up from $5.80 a year ago, but that the company has been able to increase the price of dough charged to franchisees enough to offset the inflationary pressure on the company’s bottom line. Panera sets the price of dough for franchisees against retail menu prices, rather than wholesale prices.

Same-store sales for the fourth quarter are expected to increase between 1 percent and 3 percent, still reflecting negative traffic.

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