Flash Note

July 30, 2014

Panera Bread Co.
First Look at 2Q Results; Mixed Results; EPS In-Line but
Revenues Below Expectations; Guidance Lowered for FY14
Our Call
While adjusted EPS met our/consensus estimate of $1.74, revenues fell short on
lower-than-expected same-store sales. Management also slightly reduced its FY14
guidance range to $6.65 to $6.80 (from $6.80 to $7.00) ) based on an assumption
of higher operating expenses and negative check trends. On a positive note, traffic
improved in 2Q and thus far in 3Q. The Company will host a conference call today
at 8:30AM ET to discuss results. We will have additional commentary after the
call.
Mixed 2Q Results; EPS In-Line but Revenues Fall Short: PNRA announced
adjusted diluted EPS of $1.74, which was in-line with our estimate and
consensus. The adjusted figure excludes a $3.2mm (net $0.08 in EPS) non-
recurring benefit related to an insurance settlement. Same-store sales of 0.1%
at company-owned stores and -0.2% at franchised stores fell short of our
estimates of 1.5% and 1.2%, respectively. However, we are encouraged that
traffic improved to slightly positive territory (+0.4%). Revenues of $631.1mm
were below our estimate of $640.8mm. On the margin front, labor expense of
30.3% of sales was nearly 100 bps higher than our estimate. This was the primary
factor behind a lower-than-expected restaurant level margin ( ~140 bps below
our forecast).
3Q Sales Trends Show Improvement: For the first 27 days of 3Q, company-
owned same-store sales are trending up approximately 2.0%, lapping an increase
of ~2.1% for the same period last year. Comparisons will ease toward the end of
3Q14 as the company stores lap a same-store sales increase of 2.2% in August
and 0.7% in September from last year.
3Q EPS Guidance Below Street: Management provided a 3Q EPS target of
$1.40 to $1.46, falling below pre-release consensus of $1.54 and our published
estimate of $1.51.
FY14 EPS Guidance Range Narrowed: The Company now expects FY14 EPS
of $6.65 to $6.80, a reduction from the previous range of $6.80 to $7.00 based on
the expected decline in average check and an assumption of higher input costs.
Management's guidance includes a full year same-store sales increase of 0% to
1.5% (previously 2.0% to 3.5%) and for operating margins to decrease 135 to
185 bps y/y.
Conference Call: The Company will host a conference call to discuss 2Q14
results today at 8:30AM ET. We will have additional commentary after the call.
Earnings Variance: See the next page for details on 2Q results vs. our
expectations.
Neutral
PNRA
Price $146.62
Price Target NA
Restaurants
Lynne Collier
(214) 702-4045
lcollier@sterneagee.com
Wesley Carmichael
(214) 702-4004
wcarmichael@sterneagee.com
Company Data
52-Week Range $142.41 - $193.18
Market Capitalization (M) $3,751.3
Shares Outstanding (M) 26.1
Avg. Daily Vol. (000) 563.0
Estimates Q2 2014E 2015E
EPS 1.74 6.80 7.15
For the latest company report:
PNRA Company Report
Any Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and any potential conflicts of interest begin on Page I of the Appendix
Section. Past performance is no guarantee of future results.
800 Shades Creek ParkwaySuite 700Birmingham, AL 35209205-949-3500
Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
Figure 1: 2Q14 Earnings Variance



Source: Company reports, Sterne Agee estimates, and FactSet; Dollars in millions, except per share

Glossary:

EPS: Earnings per share
SSS: Same-store sales
Y/y: Year-over-year
Bps: Basis points

Panera Bread (PNRA) Actual 2Q14 SALI 2Q14 Variance Consensus
REVENUE $631.1 $640.8 (1.5%) $639.5
SSS - Company Stores +0.1% +1.5% (140) bps +1.6%
SSS - Franchise Stores -0.2% +1.2% (140) bps +1.5%
EBITDA $104.0 $107.7 (3.4%) $107.2
EPS $1.74 $1.74 ($0.00) $1.74
MARGINS
Restaurant-Level Margin 18.2% 19.6% (138) bps
Operating Margin (EBIT) 11.7% 11.9% (20) bps
EBITDA Margin 16.5% 16.8% (33) bps
Net Income Margin 7.5% 7.4% 11 bps
COMMON-SIZE P&L
Cost of Sales 30.3% 30.2% 5 bps
Labor 30.3% 29.2% 111 bps
Occupancy 7.1% 6.9% 21 bps
Other Operating Expense 14.2% 14.1% 2 bps
Fresh Dough Cost of Sales 86.2% 85.5% 74 bps
SG&A 5.1% 5.8% (69) bps
Pre-Opening Expenses 0.2% 0.2% (1) bps
Depreciation 4.8% 4.9% (13) bps
Interest, Net 0.0% 0.0% 2 bps
Taxes 4.3% 4.5% (18) bps
OTHER FACTORS
Effective Tax Rate 36.7% 38.0% (131) bps
Share Count 27.1 27.1 0.0 shares
Page 2
J uly 30, 2014
APPENDIX SECTION
Company Description:
Panera Bread Company owns and franchises bakery-cafes under the Panera Bread, Saint Louis Bread Co., and Paradise Bakery &
Caf names. Panera's bakery-cafes are principally located in suburban, strip mall and regional mall locations. Panera features high
quality, reasonably priced food in a warm, inviting, and comfortable environment.
IMPORTANT DISCLOSURES:
Regulation Analyst Certification:
I, Lynne Collier and Wesley Carmichael, hereby certify the views expressed in this research report accurately reflect my personal views
about the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed by me in this report.
Price Target Risks & Related Risk Factors:
Investment risks associated with the achievement of the price target include, but are not limited to, a company's failure to achieve Sterne,
Agee & Leach, Inc., earnings and revenue estimates; unforeseen macroeconomic and/or industry events that adversely affect demand for a
company's products or services; product obsolescence; changes in investor sentiment regarding the specific company or industry; intense
and rapidly changing competitive pressures; the continuing development of industry standards; the company's ability to recruit and retain
competent personnel; and adverse market conditions. For a complete discussion of the risk factors that could affect the market price of
a company's shares, refer to the most recent Form 10-Q or 10-K that a company has filed with the Securities Exchange Commission.
Company Specific Risks:
Investment risks include: slowing domestic economic growth, pressures on consumer spending and sentiment, and commodity and labor
inflation.
Valuation Methodology:
Methodology for assigning ratings and target prices includes qualitative and quantitative factors including an assessment of industry
size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition; and
expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry
or company-specific occurrences. Sterne, Agee & Leach, Inc., analysts base valuations on a combination of forward looking earnings
multiples, price-to-revenue multiples, and enterprise-value-to-revenue ratios. Sterne, Agee & Leach, Inc., believes this accurately reflects
the strong absolute value of earnings, the strong earnings growth rate, the inherent profitability, and adjusted balance sheet factors.
Additional company-specific valuation methodology is available through Sterne, Agee & Leach, Inc.
Definition of Investment Ratings:
BUY: We expect this stock to outperform the industry over the next 12 months.
NEUTRAL: We expect this stock to perform in line with the industry over the next 12 months.
UNDERPERFORM: We expect this stock to underperform the industry over the next 12 months.
RESTRICTED: Restricted list requirements preclude comment.
Ratings Distribution:
IB Serv./ Past 12Mos.
Rating Category Count Percent Count Percent
Buy 259 49.43% 35 13.51%
Neutral 251 47.90% 26 10.36%
Underperform 14 2.67% 0 0.00%
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Past performance is no guarantee of future results.
For UK Professional Clients
Appendix Section, Page I
J uly 30, 2014
This research report is disseminated in the UK by Sterne Agee UK LLP which is authorized and regulated by the Financial Conduct
Authority. This research report is intended for distribution in the UK only to, and should be relied upon only by, persons who or may be
classified as eligible counterparties or professional clients pursuant to the FCA's rules or who are investment professionals as defined in
Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.
Copyright 2014 Sterne, Agee & Leach, Inc. All Rights Reserved.
To receive price charts or other disclosures on the companies mentioned in this report that are not the subject of this report
which Sterne Agee continues to cover, please visit our website at https://sterneagee.bluematrix.com/sellside/Disclosures.action
or contact Sterne, Agee & Leach, Inc. toll-free at (800) 240-1438 or (205) 949-3689.
Appendix Section, Page II
J uly 30, 2014


Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for over a century. During the early years, our founders
prominently established themselves in the financial securities industry in the southeastern United States. Today, we have expanded to serve all regions of the country. Sterne,
Agee is headquartered in Birmingham, Alabama. Sterne Agee is one of the largest independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee
Group, Inc., which also includes The Trust Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee
Financial Services, Inc.www.sterneagee.com

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