BJ’s Restaurants, Inc. (BJRI), Panera Bread Co (PNRA): These Restaurants Stopped Serving Up Growth

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In the second quarter, comparable sales were only 0.3%, reflecting a more than 2% increase in pricing offset by a 3% decrease in traffic. The first quarter results were not much better. BJ’s had 0.4% comps and a 3% decrease in traffic. If the company can’t get customers in the door, it’s impossible to be a growth stock. The share price dropped on high volume when second quarter results were announced.

BJ’s Restaurants, Inc. (NASDAQ:BJRI)’s comps are down – lost customers, higher pricing, and a moatless concept in the micro-brewery/pizza universe may be responsible. Is it fixable?

In the first half of 2013, guest traffic has decreased 3% – an unwelcome trend that management is attempting to correct with advertising, new menu items, and speedy service. Investors will be focused on whether the company has the right plan in place and can improve these numbers, before sending the share price back to all-time highs around $54.

Panera Bread doesn’t rise

Panera Bread Co (NASDAQ:PNRA) was the best of the trio of restaurants. It has been an ultra-steady growth story, rarely falling short of estimates and not known for disappointing investors. In 2Q13, it came up short of estimates with revenue at $589 million and EPS of $1.74 – $0.05 shy of expectations. Comparable store sales were a slow 3.7% for all stores and 3.8% at company restaurants. Check amounts increased 4.3%, mainly from price increases, and traffic was a negative 0.5%. Much like the other two flagging restaurants, Panera Bread Co (NASDAQ:PNRA) is having its own problems getting customers to stop by and eat. One bad quarter does not make Panera a disaster, but there is a troublesome downward trend developing this spring and summer:


Restaurant comps

* April 4.7%
* May 4.1%
* June2.6%
* July 2.1%

Of more concern is the decline in traffic. Comps supported by price increases are weak and unsustainable. Restaurants that relentlessly rely on raising menu prices run the risk of alienating customers. The downward spiral continued in 2013.

The proposed fix is nearly identical to everyone else’s: tinker with the menu, speed up service, and market aggressively.

As usual with a growth story that misses expectations, the sell-off was marked and heavy.

Investors looking for an opportunity took advantage of the fast drop and bought, sending the price back up modestly. Ignite and BJ’s apparently have more to prove. Panera Bread Co (NASDAQ:PNRA) has been a great growth stock for a few years and investors were in the mood to forgive just a little.

Is it an opportunity now? Guidance is conservative and 2013 figures have been revised down.

From the conference call:

The company revised full year EPS growth downward to $6.75-$6.85 per share and lowered comp store to 3%-5% from 4%-5%.

If Panera Bread Co (NASDAQ:PNRA) pulls off a positive surprise, this would be the time to buy. However, management does not have a reputation for low-balling guidance, and if it comes in at estimates, then we can’t expect much in the way of gains this year.

jean graham has no position in any stocks mentioned. The Motley Fool recommends BJ’s Restaurants and Panera Bread. The Motley Fool owns shares of BJ’s Restaurants and Panera Bread Co (NASDAQ:PNRA). jean is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article These 3 Restaurants Stopped Serving Up Growth originally appeared on Fool.com and is written by jean graham.

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