Los Angeles, July 25 - Panera Bread Co. Tuesday reported a 7 percent drop in quarterly earnings and said profit for the rest of the year would be below Wall Street expectations due to higher costs and weak customer traffic.
The company's shares were off 4.3 percent in extended trade following the announcement.
Like many restaurant companies, Panera has been grappling with rising food and labor costs and weak customer traffic due to higher gasoline prices and increased competition from grocery stores and others. The company withdrew its previous 2007 profit outlook last month after cutting its second-quarter forecast.
Panera said Tuesday that increased demand for products that cost more to make, such as salads and breakfast souffles, have hampered store profits. In addition, Panera's chief financial officer said Tuesday that fewer customers than expected are frequenting the cafes.
"Traffic isn't as good as we expected," CFO Jeff Kip said in a telephone interview.
Second-quarter net income was $13 million, or 39 cents per share, compared with $14 million, or 44 cents per share, a year ago.
In June, Panera cut its second-quarter earnings forecast to between 38 cents and 40 cents per share from a range of 47 cents to 51 cents a share.
Earlier this month, Panera said second-quarter revenue rose 28 percent to $253 million. Same-store sales, a key retail measure that tracks sales at Panera outlets open at least 18 months, rose 2.1 percent during the period.
For the third quarter, Panera forecast earnings of 32 cents to 38 cents per share, and for the second half of the year, the company expects earnings of 86 cents to $1.02 per share.
Wall Street analysts, on average, were expecting second-half earnings of $1.12 per share, including 43 cents per share in the third quarter and 69 cents per share in the fourth quarter.
The second-half target assumes same-store sales growth of 2.25 percent to 4.75 percent, while third-quarter same-store sales are forecast to be up 2.5 percent to 4.5 percent.
For July, Panera projected same-store sales growth of 3.6 percent to 3.9 percent, but Kip said the company "can't promise that it's going to hold through the whole back half of the year."
Panera shares fell to $44 after hours after closing at $45.98 on Nasdaq. The stock has dropped nearly 18 percent so far this year. (Reporting by Nichola Groom)