Tuesday, April 21, 2009

Panera Bread (PNRA) is Upscale McDonalds

Panera Bread (PNRA) has looked like a champ through the last 6 months -- up 50% while the S&P has slumped 8% over that same period. Conventional wisdom has been that only McDonalds (MCD) was supposed to do well in the downturn, as people bought "value meals" en masse. Darden's (DRI) results a few weeks ago showed that, even in tough times, people do still want to go out and eat at restaurants other than the golden arches. So, what's going on at Panera? I hadn't been to one until a few months ago. I noticed that the number of stores in Naples, FL, went up from 2 to 5 almost overnight -- and they were always packed. Once you go in, you understand the formula: Upscale McDonalds. It's good healthy food that's fast and cheap. People are going there instead of a more expensive sit-down restaurant for dinner -- although lunches are the busiest time of day. With the number of new Panera stores opening in recent months (Management has said they like opening franchises in this environment because they lock-in low leases for many years out), revenue growth should continue to move upwards for the coming quarters.

Originally published in RealMoney.com on 4/16/2009 3:04 PM EDT

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