With Panera and Chipotle Earnings, 'Fast Casual' Is Hot

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Higher prices and better sales of Panera's more profitable menu items lifted the soup and sandwich chain's profit 34 percent in the October-December quarter.

Revenue in Panera (PNRA) restaurants open at least a year, a key retail metric that strips out the skewing effect of new and closed stores, rose 5.1 percent in locations the company owns and 4.7 percent in franchised locations, Panera said Tuesday, because of higher customer checks. The number of purchases fell slightly because of Superstorm Sandy, which struck the East Coast on Oct. 31 and caused power outages for millions.

Panera Bread Co. owns 809 bakery-cafes, and there are also 843 franchised Paneras. The company gets a percentage of sales from the franchised restaurants.

Chains like Panera and Chipotle (CMG) that are considered a step up from fast food have gotten more popular with diners in recent years.

The company also on Tuesday named a Goldman Sachs (GS) banker, Roger Matthews, as its new CFO. He will start in March, taking over from Thomas Patrick Kelly. Kelly became the temporary finance head in April after the former CFO left for another company.

paneraFourth-quarter net income came to $51.6 million, or $1.75 per share, just above Wall Street's estimate of $1.74. That's up from $38.6 million, or $1.31 per share, the year before.

Revenue rose 15 percent to $571.6 million, beating expectations of analysts polled by FactSet of $567.4 million. Costs rose 13 percent to $488.2 million. Like other companies in the food industry, Panera has had to deal with higher costs for ingredients and materials.

For the current quarter, Panera expects profit of $1.62 to $1.66 per share. That depends on revenue in stores open at least a year growing 4 to 5 percent. So far in the quarter, that metric is up 3.9 percent.

Analysts expected profit of $1.62 per share in the first quarter.

Chipotle Mexican Grill continued to open new locations throughout the final quarter of the year in an aggressive expansion, pushing net income nearly 7 percent higher.

At stores open at least a year, revenue rose 3.8 percent on higher customer traffic. That's a closely watched industry figure because it strips out the effect of new and closing stores.

Despite increasing costs for ingredients, Chipotle had been reluctant to test customers with higher prices in a weak economy. But it did so, mostly in 2011, and the move appears to be paying off as the company's costs for beef, salsa ingredients and dairy keep rising.

The Denver restaurant chain reported earnings of $61.4 million, or $1.95 per share, for the quarter ending Dec. 31. That compares with $57.5 million, or $1.81 per share, for the same period last year.

Revenue rose 17 percent, to $699.2 million from $596.7 million.

The per-share earnings were a penny shy of Wall Street expectations, according to a poll by FactSet, but it topped analyst projections for revenue of $696 million.

After opening more than 120 new locations during the first three quarters of the year, Chipotle accelerated that pace in the final three months of 2012, opening 60 new restaurants.

It predicted a slower rate of openings this year, with 165 to 180 new restaurants.

In 2012, Chipotle earned $278 million, or $8.75 per shares, up from $214.9 million, or $6.76 per share, in 2011. Revenue in stores open at least a year rose 7.1 percent, while total revenue rose 20 percent to $2.73 billion.

For 2013, Chipotle expects slower growth in the metric: A range of unchanged to growth of up to a low single digit percentage.

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