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Panera reveals progress on efforts to boost speed, shares drop
February 12, 2015 / 6:11 PM / 3 years ago

Panera reveals progress on efforts to boost speed, shares drop

Feb 12 (Reuters) - Panera Bread Co shares tumbled about 8 percent on Thursday on concern its efforts to speed up service at its popular bakery-cafes will take a bite out of its 2015 profit, analysts said.

The St. Louis-based company recently launched a program called Panera 2.0 to test mobile and kiosk ordering, operational short-cuts and other programs aimed and delivering faster, more accurate service, particularly at peak hours when long lines can drive away customers.

Restaurant companies across the spectrum are making similar moves. McDonald’s Corp is trimming menus and testing mobile ordering, while industry leader Chipotle Mexican Grill Inc constantly tweaks its processes to boost speed.

Panera disclosed details from the fourth quarter, when it opened nine delivery hubs and converted 59 bakery-cafes to Panera 2.0.

That transparency did little to reassure investors and analysts.

“Concerns about the costs of Panera 2.0 will persist. Preliminary 2.0 data paint a mixed picture of higher costs and modest sales lifts outside of Boston,” Sanford Bernstein analyst Sara Senatore said in a client note.

Panera warned on Wednesday that 2015 earnings-per-share growth could be flat to down as much as the high-single digit percentages.

Senatore said that implies a range of roughly $6.07 to $6.53, well below analysts’ estimate.

Among other things, Panera said it is scheduling extra staff to handle the additional work created by digital and custom orders. That extra labor increases costs at a time when restaurant margins already are feeling the pinch of minimum wage increases and other expenses.

The added staff includes new “expeditors,” which are tasked with communicating between customers and staff, Chief Executive Officer Ron Shaich said on a conference call.

The company plans to convert about 300 more shops to Panera 2.0 by year end, which will bring the number to around 400, or about half of the chain’s company-operated stores.

Shaich said the most recent conversions had lower labor costs, and he urged Wall Street to be patient since the conversions also include substantial technology installations.

“Panera 2.0 requires us to retrain our organization to handle higher volumes in shorter bursts of demand,” said Shaich.

“Panera 2.0 is not a light switch. To do this right takes time and real effort.”

Panera shares were down $14.84 at $161.64 in afternoon trading. (Reporting by Lisa Baertlein in Los Angeles. Editing by Andre Grenon)

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