Of the three restaurant chains, Chipotle Mexican Grill, Inc. (NYSE:CMG), Panera Bread Co (NASDAQ:PNRA), and Yum! Brands, Inc. (NYSE:YUM), which one has the best future growth prospects? Earning season is almost over and only 67% of S&P 500 companies beat expectations on the bottom-line (earnings) and only 53% beat expectations on the top-line (revenue). Finding sustainable growth in today’s economy is a real challenge.
All three restaurant chains recently reported their quarterly earnings. The table below compares several revenue and growth metrics, and the last column identifies which company has the best performance in that category. Let’s start our review by comparing the revenue of the three companies to see how fast they are growing the top-line.
|Revenue and Growth Comparison|
|Company||Chipotle Mexican Grill Q2FY13Ending June 30, 2013||Panera Bread Company Q2FY13Ending June 25, 2013||Yum! BrandsQ2FY2013
Ending June 15, 2013
|Qtrly Revenue Growth (yoy)||18.2%||12.07%||-8.3%||Chipotle Mexican Grill|
|Revenue forward guidance||16% – 18%||8% – 12%||1%||Chipotle Mexican Grill|
|Same Store Sales Increase/Decrease||5.5%||3.8%||1%||Chipotle Mexican Grill|
|Annual growth in new store openings||11.7% – 12.8%||6.9% – 7.6%||5.3%||Chipotle Mexican Grill|
Chipotle Mexican Grill
As of June 30, Chipotle Mexican Grill, Inc. (NYSE:CMG) had 1,502 restaurants, of which 1,490 were located throughout the United States, five in Canada, six in London, and one in Paris. The company’s restaurants include two ShopHouse Southeast Asian Kitchen restaurants, its new concept serving Asian inspired cuisine. The company opened 92 restaurants during the six months ending June 30, and expects to open an additional 73 to 88 restaurants in the second half of 2013, including up to four additional ShopHouse restaurants.
Chipotle Mexican Grill, Inc. (NYSE:CMG)’s comparable restaurant sales increased 3.4% for the first six months of 2013, and 5.5% for the second quarter of 2013, and expect full year comparable restaurant sales increases in 2013 to be in the low to mid-single digits. During the first half of 2013, the company launched catering services in select markets, and expects to offer catering in all Chipotle Mexican Grill, Inc. (NYSE:CMG) restaurants in the U.S. by the end of the year.
As of June 30, Panera Bread Co (NASDAQ:PNRA) had 1,652 company-owned and franchise-operated bakery-cafe locations in 44 states, the District of Columbia, and Ontario, Canada. During the second quarter fiscal 2013, the company opened 18 new bakery-cafes and its franchisees opened 19 new bakery-cafes. As a result, there were 1,708 bakery-cafes opened system-wide as of June 25. For 2013, the company maintains its target of unveiling approximately 115–125 system-wide units.
While Panera Bread Co (NASDAQ:PNRA) did report a very good quarter, it missed expectations and lowered forward guidance. Panera Bread Co (NASDAQ:PNRA)’s revenue jumped 11% to $589 million, missing analysts’ expectations of $596 million. The company had predicted growth of 4% to 5% at company-owned bakery-cafes; however, same-store sales grew only 3.8% at company-owned bakery-cafes and 3.5% at franchise-operated bakery-cafes. The company has lowered its forecast for same-store sales to 2% to 4% for the second-half of 2013.
Average weekly sales, or AWS, for company-owned new bakery-cafes through the second quarter were $50,983 compared to $48,484 in the same period of fiscal 2012. AWS for franchise-operated new bakery-cafes through the second quarter fiscal 2013 were $49,855 compared to $47,109 in the same period of fiscal 2012. The average weekly net sales performance for new company-owned bakery-cafes is expected to be at the high-end of the previously provided targeted range of $40,000 to $42,000 for fiscal 2013.
Panera Bread Co (NASDAQ:PNRA) recorded double-digit growth rates on both top and bottom lines, but the market had already been expecting strong growth, so this was something of a miss compared to expected earnings. The stock now trades at a trailing P/E of 26, and a forward PE of 22. Therefore, Panera will have to continue to generate high earnings growth. However, this trailing earnings multiple does represent a discount to Chipotle Mexican Grill, Inc. (NYSE:CMG).