Panera fills up as delivery, digital initiatives take hold

Although it originally focused almost solely on making sure it could deliver a premium food experience to its cafe customers, Panera has more recently turned its attention to keeping up with its competitors in offering customers more options for ordering and getting their items. Coming into Tuesday's third-quarter financial report, Panera investors wanted to see that the moves that the fast-casual company had made were starting to have an impact, and the restaurant chain's results provided much-needed evidence of progress. Let's take a closer look at the latest from Panera Bread and what we're likely to see in the quarters to come.

Panera Bread delivers

Panera's third-quarter results didn't look all that strong on their face, but they nevertheless were substantially better than what many had looked to see. Sales rose by 3% to $684.2 million, which was almost a full percentage point higher than most investors were expecting from the company. On the bottom line, Panera saw adjusted net income fall 5% to $32 million, but a reduction in share count produced gains in earnings on a per-share basis, coming in at $1.37 versus the consensus forecast among investors of $1.34 per share.

Check out photos of Panera's delicious dishes:

Panera for Lunch
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Panera for Lunch
Lunch at Panera 母とパネラでランチ♪ #lunch #panera #ランチ
Hands down the best when sick #Panera #bang #chicken #lemon #orzo #soup, #mediterranean #chicken #and that good ol #fresh #bread
So happy I found a panera gift card in my wallet today! #panera #panerabread #asiagosteaksandwich #lunch #food #like4like #likeforlike #instagood #instamood #instadaily #iphonesia #love #potd #photooftheday #instayum #instafood #monday #nomnomnom #gm #goodmorning
Love the strawberry poppyseed salad from Panera :)#yum #panerabread #panera
Yummy breakfast from #panera nom nom nom 😜 #yummy #vegan #vegansofig #gayvegan #coffee #avocado #goodmorning
I love the iced green tea at Panera. #greentea #icedtea #panerabread #panera
I finally had my first bread-bowl cheddar broccoli soup from Panera!!! #excitement #food #foodporn #panera #soup #bread #breadbowl #yum
#panera #healthyfood #foodporn #smoothies @everybodysarockstar
Yes please! #panera #mothersday
Great lunch that I didn't even finish ._. #lunch #panera #panerabread #paneraemployee #employeediscount #paneraassociate #yummy
#frozenmocha #panera #drinkofchoice 🍫👍🏼

Looking more closely at Panera's financials, you can see some evidence of broader improvement, although some of the numbers were fairly tepid. Systemwide comparable restaurant sales rose 1.7%, slowing from its better pace earlier in the year. Most of the gains came from company-owned cafe locations, which posted a 3.4% rise in comps. By contrast, franchise-owned locations saw only a tiny 0.2% increase.

Interestingly, Panera said that some of its initiatives toward encouraging delivery and batch-ordering showed up in its comparable results. Among company-owned stores, average check size jumped 4.9%, but the number of transactions declined 1.5%. In explaining the rise in average check size, Panera said that price increases accounted for roughly half of the increase, with the other half coming from a shift among customers toward higher-priced items. The number of entrees that Panera served rose 0.9%, and the difference between that figure and the drop in number of transactions suggests that more people are combining orders to take advantage of Panera's initiatives.

To support those findings, Panera released some data on how much its customers are taking advantage of new offerings. The fast-casual chain said that digital utilization rose to more than one-fifth, showing the power of the Panera 2.0 movement. Delivery is now available in roughly one out of eight Panera locations, including a fifth of those owned by the company directly.

Panera CEO Ron Shaich celebrated the company's foresight. "Many years ago, we foresaw the forces reshaping the restaurant industry," Shaich said, "and conceived a strategic plan to capitalize on them. ... While others in the industry are just now recognizing and beginning to tap into these themes, I am pleased to say that Panera is years ahead in our efforts."

See what other restaurants join Panera's ranks for the best 'clean' eating':

Best fast-food and casual restaurants for 'clean' food
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Best fast-food and casual restaurants for 'clean' food
MIAMI, FL - APRIL 27: Chipotle restaurant workers fill orders for customers on the day that the company announced it will only use non-GMO ingredients in its food on April 27, 2015 in Miami, Florida. The company announced, that the Denver-based chain would not use the GMO's, which is an organism whose genome has been altered via genetic engineering in the food served at Chipotle Mexican Grills. (Photo by Joe Raedle/Getty Images)
The Panera Bread Co. logo is seen on a cup of iced tea and a bag arranged for a photograph outside of a restaurant in Torrance, California, U.S., on Monday, Oct. 21, 2013. Panera Bread Co. is scheduled to release earnings figures on Oct. 22. Photographer: Patrick T. Fallon/Bloomberg via Getty Images
Chicken nuggets, french fries, and a fried chicken sandwich are arranged for a photograph during an event ahead of the grand opening for a Chick-fil-A restaurant in New York, U.S., on Friday, Oct. 2, 2015. Chick-fil-A, the Southern chicken-sandwich chain that has drawn both controversy and copycats over the years, has finally arrived in New York. The company will open a 5,000-square-foot (465-square-meter), three-level restaurant in Manhattan's Garment District that will be the chain's largest location in the nation. Photographer: Michael Nagle/Bloomberg via Getty Images

What's ahead for Panera?

In addition, Panera expects its efforts to produce even better results ahead. In Shaich's words, "We are confident our efforts will translate into industry-leading comps and sustainable double-digit earnings growth in 2017."

More specifically, Panera boosted its guidance for the full year because of its success. The company now believes that adjusted earnings will come in between $6.67 and $6.72 per share, with comparable-restaurant sales climbing between 4% and 5% and stronger weekly net sales performance than previously expected. For the fourth quarter, Panera is looking for comps growth of 3.5% to 4% and earnings of $1.96 to $2.01 per share. Both earnings figures are consistent with what investors had expected to see coming into the report.

Panera shareholders celebrated the news, sending the stock up 5% in after-hours trading following the announcement. As long as the restaurant chain keeps its customers happy with its new systems for making ordering and getting their food easier, Panera has great potential to build positive momentum in its core business.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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