Panera Bread 2012 Annual Report Download - page 3

April 18, 2013
Dear Stockholder,
For years now, you have heard us say that the real test of a company is its ability to generate shareholder value over the long-term.
With that said, we realize that a management team’s credibility is built by delivering results year-over-year, quarter-by-quarter. Thus,
we are pleased to report that 2012 was another extraordinary year for Panera.
We’re proud to have exceeded our earnings targets in each quarter of 2012. In 2012, our earnings per share (EPS), excluding a one-
time legal charge in 2011, grew 27%. These results were driven by company comparable bakery-cafe sales growth of 6.5%, the
opening of 123 new bakery-cafes system-wide at record opening volumes and our strong operating disciplines. We are especially
proud of the fact that, despite the volatility over the past half-decade in the U.S. economy, this was the fifth consecutive year that our
EPS has grown 24% or greater and the fifth consecutive year in which we exceeded the upper end of our long-term EPS growth target
of 15%-20%. This performance puts us at or near the top of our industry. It thus seems fitting to us that this year, for the first time in
our history, Panera Bread made it onto the highly coveted list of FORTUNE’s “World’s Most Admired Companies , confirming the
pride we all feel in Panera.
Shareholders who read our letters over the years know that it is our most fundamental belief that, in order to generate the kind of
performance we have produced, we must excel at delivering a differentiated experience to millions of customers each week across our
store base of almost 1,700 cafes. To that end, our focus in 2012 continued to be on improving the overall quality of the Panera
experience by investing in these four key areas: the quality of our food, the evolution of our marketing, the growth of our catering
business and the quality of our operations (all of which were facilitated by an ever stronger team). Taken together our success in these
four allows us to build differentiation and ultimately create competitive advantage.
Serving Food of Which We and Our Customers Can Be Proud
For many years we have executed a strategy of building category ownership (meaning that we have high levels of credibility in that
category in the minds of our target consumers) by utilizing the talents of our food development group and the size and scale of our
supply chain to drive innovation. To that end, we continue to bring new, unique products to market while improving the quality of
existing products. Indeed over time, our food development and supply chain teams, working in partnership, have driven the success of
our signature salad, sandwich, soup, and smoothie categories.
Last year we once again experienced the positive impact of food development and supply chain working together to drive innovation
in the Panera experience. Indeed, in 2012, that partnership drove the sourcing and use of antibiotic-free roasted turkey which, in turn,
resulted in very strong sales growth. When antibiotic-free roasted turkey both tastes better and is something our customers feel better
about eating and serving their families, customers vote with their wallets. And they did just that in 2012. Last year, signature
sandwich sales grew 18% versus 2011 levels led by the introduction of our new Roasted Turkey & Avocado BLT sandwich.
Similarly, we experienced continued growth in our signature salad sales which were up 13% versus 2011 levels, led by the successful
Chopped Chicken Cobb Salad with Avocado and supported by the rollout of a new Roasted Turkey Orchard Harvest Salad.
In early 2013, we introduced a new menu category to Panera – pasta. Our food development and supply chain teams have been hard
at work for more than two years developing several high quality pasta offerings that will complement our soups and salads. As with
all of our new products, our customers expect us to deliver a high quality product with the best ingredients that is differentiated from
our competitors. We believe that we have done just that with our new pastas. We encourage you to try them and let us know what you
think.
Strategically Refining and Expanding Our Marketing
We continued to refine our media and advertising strategy in 2012 as we tried to both deepen our relationship with the customers who
use Panera frequently, but also increase our reach to those who are not regular users of Panera. Although we increased the dollars we
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