Panera Bread Co.’s new co-chief executives on Wednesday said recent C-suite changes will have minimal effect on the bakery-café chain’s performance.
Ron Shaich, Panera’s chairman, and Bill Moreton, the company president, said during a call to discuss first-quarter earnings with analysts that their new co-chief executive titles, assumed in March, formalized their working relationship at the St. Louis-based company.
That co-CEO move, as well as the resignations of Panera’s chief financial officer and its chief operating officer, had raised eyebrows on Wall Street.
“We’ve gotten a number of questions and, frankly, heard a few rumors,” Moreton said. “To me, this is simply formalizing the partnership that Ron and I have had over the last 12 months of running Panera.
“Ron has been focused on the vision of how Panera best competes, both now and in the future,” Moreton continued. “He brings his 30 years of experience in founding and running our company and his innate sense of the consumer and consumer trends to making sure Panera keeps out front of our competition. At the same time, I have been focused on the day-to-day business of running Panera.”
Moreton also assured analysts that other recent executive changes offered career opportunities for Panera’s team.
In mid-April, John Maguire resigned, effective May 31, as chief operating officer to become chief executive of Friendly’s Ice Cream LLC, which emerged earlier this year from bankruptcy. Maguire will be succeeded by Charles Chapman III, who is currently Panera’s executive vice president of development and licensing.
Earlier in the month, Panera named Thomas Patrick Kelly as interim chief financial officer while the company continues to search for a permanent successor to Jeff Kim, who resigned in March to join IAC/InterActive Corp.
Shaich, who founded Panera and in May 2010 transitioned to executive chair, said he did so to “get a break from the unrelenting pace of 30 years of running this company and managing all of our constituent relationships.”
That break, Shaich said, helped re-energized him and over the past 12 months he has been back working on innovation and technology projects.
“Ultimately, we and the board came to conclude co-CEOs was the best way to reflect our actual roles,” Shaich said. “The change in titles we executed last month was simply a reflection of that reality.”
Shaich said he will focus on how Panera innovates food products and café experience in a role he likened to “chief product or competitive officer” and Moreton will concentrate on business and processes in a role similar to “chief corporate officer.”
“Together, we bring more than either of us can bring alone to the task,” Shaich said. “In our view, and I think in the view of the board, one plus one does equal three for Panera shareholders.”
Moreton added: “I want Ron here. It is a blessing to both me personally and to Panera. It is great to have someone who has been my friend and mentor for 15 years share the responsibilities for running our great company.”
Shaich said the 1,562-unit Panera has performed well under Moreton.
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On Tuesday, Panera Bread Co. posted a 25.7-percent increase in first-quarter profit, crediting a 6.3 percent gain in systemwide same-store sales.
Other topics the executives discussed in Wednesday’s analyst call were:
Drive-thru expansion: Panera plans to add drive-thrus to about 80 new or retrofitted stores this year. The company ended 2011 with 119 drive-thrus.
“We really have gotten to the place now where we think it’s concept-appropriate [and] that the drive-thru experience is not hurting the inside-the-four-walls dining experience. ” Moreton said. “It increases frequency and we have a chance to get that consumer visit that we might not otherwise, when they really have to be tied to their car because they have their kids or etc., etc.”
Drive-thrus are a factor in looking at new sites, Moreton said.
“We think it adds to our customer convenience factor,” he said.
Special promotions: The company plans an earlier start this year of its “Summer Celebration” promotion, which will feature a strawberry-poppy seed salad and smoothies.
New products: Panera will introduce a new roast turkey and avocado bacon-lettuce-tomato sandwich in May, which Moreton said has tested very well. That will be followed by a turkey-cranberry Panini in the third quarter and the rollout of a grilled cheese sandwich in the fourth quarter. The executives said last quarter’s Norwegian salmon salad introduction was popular.
Breakfast: In the first quarter, the introduction of an egg-white sandwich helped drive breakfast sandwich sales up 19 percent in the quarter.
“Since we launched breakfast sandwiches more than four years ago, this category has grown more than 10 percent every quarter,” Moreton said.
Marketing: Panera plans to cautiously increase its marketing expenditures this year from 1.3 percent of sales in 2011 to 1.5 percent in 2012, Moreton said. The increase reflects a 27-percent increase in spending. The company started a cable television ad program in the first quarter that is intended as a test, he added.
Catering: Catering sale grew 25 percent in the first quarter on top of 26-percent growth in the first quarter of 2011, Moreton said. The company is working on targeted marketing efforts in catering, he added.
Commodity inflation: First-quarter commodity inflation was about 3.25 percent, Moreton said, but that is expected to ease for the rest of 2012.
“For the year, we expect all-in food and paper cost inflation of approximately 2.5 percent, down from our previous estimate of 2.75 percent as the result of falling dairy and coffee prices,” he said.
Panera owns and franchises bakery-cafes under the Panera Bread, St. Louis Bread Co. and Paradise Bakery & Café banners.