Panera Bread 2005 Annual Report Download - page 3

Dear Shareholders,
What an exhilarating year we just completed. Over the full year 2005, system-wide comparable bakery-cafe
sales grew 7.8% (7.4% for Company-owned locations and 8.0% for franchise-operated locations). These
strong comps helped drive average weekly sales to $38,318, or just shy of $2 million per bakery-cafe
annually. In addition, we opened a bakery-cafe every third day or so—139 to be exact—in 2005 (66
Company-owned locations and 73 franchise-operated locations). Strong growth in new cafe openings and
strong comparable bakery-cafe sales growth fueled Company revenue growth of 34%, to $640.3 million. In
2005, system-wide bakery-cafe sales reached almost $1.6 billion ($0.5 billion for Company-owned
locations and $1.1 billion for franchise-operated locations), driving Company earnings per share (EPS) to
$1.65, up 32% over 2004 EPS.
By year-end 2005, Panera Bread bakery-cafes numbered 877 system-wide, 311 of which were Company-
owned, and 566 of which were franchise-operated. Panera ended the year with nearly $71 million in cash
and investments, and no debt.
The byproduct of strong Company performance was a 69% rise in the value of Panera stock during 2005.
What is even more exciting is that Panera’s stock performance has been the best in the industry for the last
decade. As the Wall Street Journal recently reported in its “Shareholder Scorecard,” Panera was the top-
performing large restaurant stock not only last year, but also in the past five- and ten-year time frames as
well. We believe this speaks to the strength of our concept and the potential that still lies ahead.
2005 SUCCESS FACTORS
What enabled Panera to succeed in 2005 and over the last decade? Simply put, it is our concept and our
execution. We think our continued commitment to providing crave-able food that people trust, served in a
warm, community gathering place by associates who make our guests feel comfortable, really matters.
When this is rooted in our commitment to the traditions of handcrafted, artisan bread, something special is
created. As we say here at Panera, it’s our Product, Environment, and Great Service (PEGS) that we count
on to deliver our success —year in and year out.
More than ever before, customers today care deeply about the origin and quality of ingredients that
comprise the foods they eat. In 2005, several winning products reaffirmed our commitment to food that
people can trust. A prime example was our all-natural, antibiotic-free (ABF) chicken. While there are
significantly higher costs associated with sourcing ABF chicken, we realized that Panera customers
expected chicken of that quality at Panera. Accordingly, customer response to products like our Chicken
Bacon Dijon sandwich and our Asian Sesame Chicken Salad has been extremely positive.
In April 2005, the USDA began to recommend in its food guide pyramid that half of all daily intake of
grains in a balanced diet be whole grains. At Panera, we’re proud to say that we were ahead of the curve in
developing a line of whole grain bread. We recognized in late 2004 that customers cared very much about
eating ‘good’ carbohydrates. So our bakers developed what became our popular line of whole grain bread,
using the finest ingredients we could find.
In 2005, we introduced a new line of artisan sweet goods. Made with gourmet European butter, fresh fruit
toppings and delicious new fillings, these bakery items represent a significantly higher level of taste and
quality. They reaffirm our commitment to the “Magic of the Bakery,” and are what our guests expect from
Panera.
We also began selling our egg soufflés in 2005, which offered our guests the option of a hot, egg-based
item to start off their mornings. Baked in a flaky pastry shell with a hearty egg filling, this new item
became a crave-able addition to our breakfast menu. Our soufflés were well-received by our customers, and
ultimately fueled morning sales growth.