For the twenty-six weeks ended
Fiscal Q2 2014 Results and Business Review
Comparable Net Bakery-Cafe Sales Growth
In fiscal Q2 2014, on a calendar basis, Company-owned comparable net bakery-cafe sales increased 0.1 percent, franchise-operated comparable net bakery-cafe sales decreased 0.2 percent, and system- wide comparable net bakery-cafe sales were flat compared to the comparable period in fiscal 2013.
The Company estimates that fiscal Q2 2014 Company-owned comparable net bakery-cafe sales results were negatively impacted by approximately 40 basis points from the shift of the Easter holiday from calendar Q1 2013 to calendar Q2 2014. Adjusting for this shift in Easter, Company-owned comparable net bakery-cafe sales for fiscal Q2 2014 are estimated to have been up 0.5 percent.
The Company-owned comparable net bakery-cafe sales increase of 0.1 percent on a calendar basis in fiscal Q2 2014 was comprised of year-over-year positive transaction growth of 0.4 percent and average check decline of 0.3 percent. This represents the first quarter of positive transaction growth for Company-owned bakery- cafes since fiscal Q3 2012.
After adjusting for the Easter holiday shift, fiscal Q2 2014 transactions were up approximately 0.8 percent. Average check decline was comprised of negative mix impact of approximately 0.9 percent, partially offset by price growth of approximately 0.6 percent.
For the first 27 days of fiscal Q3 2014, Company-owned comparable net bakery-cafe sales growth on a calendar basis was approximately 2.0 percent.
The Company believes that the calendar basis comparison better reflects the performance of the business as it eliminates the impact of the extra week in fiscal 2013 and compares consistent calendar weeks. Note that on a fiscal basis, Company-owned comparable net bakery-cafe sales for fiscal Q2 2014 also increased 0.1 percent.
In fiscal Q2 2014, the Company experienced a decline in operating margin of approximately 250 basis points compared to fiscal Q2 2013. This decline was primarily the result of continued investments related to key initiatives designed to improve the Company's guest experience, operational capabilities and technology infrastructure, as well as higher food and marketing expenses.
Average weekly sales ("AWS") for Company-owned "Class of 2014" bakery-cafes through fiscal Q2 2014 was
AWS for Company-owned "Class of 2014" traditional bakery-cafes through fiscal Q2 2014 was
Non-traditional bakery-cafes refers to a range of alternate formats that the Company believes will allow it to more deeply penetrate existing and new territories with a range of different formats.
Use of Capital
The total fiscal Q2 2014 share repurchases had a nominal impact on the Company's fiscal Q2 2014 earnings per diluted share. The Company has approximately
Fiscal Q3 and Q4 2014 Outlook
The Company is targeting fiscal Q3 2014 diluted earnings per share of
The Company is targeting fiscal Q4 2014 diluted earnings per share of
The fiscal Q3 and Q4 2014 targets assume the Company will continue to make investments in key initiatives consistent with its strategic plan throughout fiscal 2014. These targets also include the Company's expectation that it will continue to repurchase shares consistently throughout the year.
Full Year Fiscal 2014 Outlook
Diluted EPS Target
The Company is revising its target range for fiscal 2014 earnings per diluted share to
This full year fiscal 2014 diluted earnings per share target range is based on the following key assumptions:
Comparable Net Bakery-Cafe Sales Growth
The targeted range for the Company's fiscal 2014 Company-owned comparable net bakery-cafe sales growth is revised to 0.0 percent to 1.5 percent. The Company continues to expect both comparable net bakery-cafe sales growth and transaction growth to strengthen in the second half of fiscal 2014 as a result of the timing and momentum of initiatives underway. As a result, the Company continues to expect that full year fiscal 2014 will include positive growth in transactions.
For fiscal 2014, the Company now expects operating margin will be down 135 to 185 basis points when compared to fiscal 2013. This target reflects more modest comparable net bakery-cafe sales growth, the full year impact of the key initiatives and related investments that are underway and higher input costs.
The Company is maintaining its previous target of 115 to 125 system-wide new bakery-cafe openings in fiscal 2014 and its average weekly net sales performance target for new Company-owned bakery- cafes of
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