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Panera Could Gain From Cosi Bankruptcy

Panera Could Gain From Cosi Bankruptcy

Maxim’s Stephen Anderson expects Panera Bread Co (NASDAQ: PNRA) to be the main beneficiary of the potential closures following the bankruptcy filing of Cosi Inc (NASDAQ: COSI).

Anderson maintained a Buy rating on Panera Bread, while raising the price target from $230 to $250.

Benefitting From Bankruptcy

“Yesterday, Cosi, which is the third-largest fast casual bakery chain based in the U.S. with 100 locations, declared Chapter 11 bankruptcy after an extended period of slow sales and lack of profitability,” the analyst mentioned.

Cosi had a high concentration of restaurants in high cost urban location in the Northeastern states. Although Anderson pointed out that Panera Bread already has a strong presence in the same metropolitans as Cosi, although with fewer downtown locations, especially in Manhattan, Washington D.C. and Philadelphia.

“We expect PNRA to accelerate the opening of smaller-format “Panera To You” (take-out and delivery only) units in these markets, which we believe can generate higher ROIC ratios than traditional “suburbanstyle” locations in downtown areas,” the analyst stated.

Unit Conversions

Anderson estimated that Panera Bread had already completed 70-75 percent of the conversion of company-owned units that were opened before 2014 and that the company was likely to be able to complete the conversion program by the end of 2016.

“Given the incremental rollout of Panera 2.0—specifically higher restaurant-level throughput at converted locations, growth in digital channel sales, increased catering sales, and an accelerated rollout of delivery, we project the Panera 2.0 lift to company-owned comp will be at least 150bps on an annualized basis,” the analyst pointed out.

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Latest Ratings for PNRA

Apr 2017Wells FargoDowngradesOutperformMarket Perform
Apr 2017Telsey Advisory GroupDowngradesOutperformMarket Perform
Apr 2017RBC CapitalDowngradesOutperformSector Perform

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