Analyst Sees Sales Gain From Panera Bread Co.'s Plan

Panera Bread Co. PNRA shares have done poorly in recent quarters but prospects for a sales pick-up in 2015 should drive the stock higher, an analyst said Tuesday. Bank of America's Joseph T. Buckley said spending on improved customer service will result in higher sales -- and depressed earnings -- through next year. Buckley reiterated a Buy rating and $185 target and moved Panera to an in-house list reserved for the brokerage's "best investment ideas." The St. Louis-based restaurant chain's shares are down 7.5 percent in the year to date. But Tuesday the company was trading up 3 percent recently to $163.63 a share. Panera has a plan to raise the average sales volume through improved service levels at its 1,818 bakery-cafes "significantly" from their current annual average of $2.5 million per unit, Buckley said. The company expects to have 100 of its stores covered by the service-improvement program by the end of 2014, according to Buckely, who called the roll-out his "primary investment thesis." Same-store sales grew a mere 0.1 percent in the quarter ended June 30, but had gained 2 percent in the first month of the current period, according to the company. Panera expects to post third-quarter results Oct. 28. The company's plan to improve customer service narrowed its operating margin in the recent period by 250 basis points, although higher food prices also added to the cut. "Improved service levels should be a catalyst to drive same-store sales higher," Buckley said, noting that several "pilot" locations with the service improvement plan in place have seen same-store sales grow by the "mid single digits." Operating margin in the recent quarter narrowed by perating margin of approximately 250 basis points