Panera Bread : Fourth Quarter 2016 Earnings Release

Contact: Steve West, Vice President of Investor Relations ([e-mail])‌‌‌‌‌‌‌

Panera Bread Company Reports Q4 2016 Results and Progress on Strategic Initiatives

St. Louis, MO, February 7, 2017 - Panera Bread Company (Nasdaq: PNRA) today reported financial results for fiscal Q4 2016 and full year fiscal 2016.

Operating Highlights

• Panera 2.0 constructively completed in Company-owned bakery-cafes
• Delivery now available in 15% of system-wide bakery-cafes
• Digital sales now at 24% of total sales in Company-owned bakery-cafes
• Entire U.S. food menu and portfolio of Panera at Home products now 100% clean
• MyPanera® customer loyalty program reaches 25 million users

  Fiscal Q4 2016 and Full Year Fiscal 2016 Financial Highlights

• Q4 2016 Company-owned comparable net bakery-cafe sales up 3.0%, up 6.6% on a two- year basis
• Q4 2016 Company-owned comp sales outperform Black Box all-industry composite by 540 basis points
• Q4 2016 GAAP Diluted EPS of $1.92, up 10%
• Q4 2016 Non-GAAP Diluted EPS of $2.05, up 9%
• Full Year Fiscal 2016 GAAP Diluted EPS of $6.18, up 7%
• Full Year Fiscal 2016 Non-GAAP Diluted EPS of $6.74, up 9%

  Initial Full Year 2017 Outlook And Capital Structure Update

• FY 2017 Non-GAAP Diluted EPS target set at $7.45 to $7.70, growth of up 11% to 14%
• FY 2017 Company-owned comp net bakery-cafe sales growth target set at 3.5% to 4.5%
• Delivery targeted to be available in 30% to 40% of system-wide bakery-cafes in 2017
• Company secured new 5-year $200M term loan

Comment by Chairman and CEO

Ron Shaich, Chairman and CEO, commented, "The power of our multi-year strategic plan and the impact of our initiatives to transform Panera into a better competitive alternative with expanded runways for growth becomes ever-more clear with each passing quarter. In 2016, company comparable-store sales rose 4.2%, and our two-year comps were up 7.2%. What's more, we again took market share in 2016 as our company comps outperformed the Black Box all-industry composite by 530 basis points. As well, we notched a new record for new cafe average weekly

sales as sales reached $49,745 in new company cafes. Most importantly, our year-over-year growth in non-GAAP EPS was up 9% in 2016, which is further evidence that we have reached an inflection point in our transformation."

Shaich continued, "With peak investments and significant scale behind us, we are now focused on completing the rollout of our initiatives and reaping the benefits. Because of the strength of our initiatives, we are confident our efforts will translate into market share gains and sustainable double- digit earnings growth. Specifically, in 2017 we expect our results to again improve as we are today announcing a comp target of 3.5% to 4.5% and a non-GAAP EPS growth target of 11% to 14%."

Detailed Review

Net income and EPS

GAAP diluted EPS for fiscal Q4 2016 was $1.92 per diluted share on net income of $44 million, or up 10% compared to GAAP diluted EPS for fiscal Q4 2015 of $1.74 per diluted share on net income of $43 million.

Non-GAAP diluted EPS was $2.05 for fiscal Q4 2016 and $1.88 for fiscal Q4 2015, up 9% (see table below). A reconciliation of GAAP and non-GAAP information and the reasons why the Company uses non-GAAP financial measures is attached to this release as Schedule IV.

GAAP diluted EPS for full year fiscal 2016 was $6.18 per diluted share, or up 7% compared to GAAP diluted EPS for full year fiscal 2015 of $5.79 per diluted share.

As outlined in Schedule IV, non-GAAP diluted EPS was $6.74 for full year fiscal 2016 and $6.21 for full year fiscal 2015, up 9%. A reconciliation of GAAP and non-GAAP information and the reasons why the Company uses non-GAAP financial measures is attached to this release as Schedule IV.

The Company's fiscal Q4 2016 and full year fiscal 2016 consolidated statements of income and margin analyses are attached to this release as Schedule I. The following table sets forth, for the periods indicated, certain items included in the Company's consolidated statements of income (in thousands, except per share data and percentages), including GAAP net income and diluted EPS and non-GAAP net income and diluted EPS:

For the 13 Weeks Ended Percentage

December 27, 2016 December 29, 2015

Change

Total revenue	$727,106	$691,765	5%
Net income, as reported (GAAP)	$44,010	$43,160	2%
Refranchising loss	-	5,376
Amount reserved for a legal matter	4,450	-
Tax impact of adjustments	(1,526)	(1,969)
Net income, excluding certain items (non-GAAP)	$46,934	$46,567	1%
Diluted EPS, as reported	$1.92	$1.74	10%
Refranchising loss	-	0.22
Amount reserved for a legal matter	0.20	-
Tax impact of adjustments	(0.07)	(0.08)
Diluted EPS, excluding certain items (non-GAAP)	$2.05	$1.88	9%
Shares used in diluted EPS	22,916	24,786	-8%
Comparable Net Bakery-Cafe Sales Growth

In fiscal Q4 2016, Company-owned comparable net bakery-cafe sales increased 3.0%, franchise- operated comparable net bakery-cafe sales decreased 1.4%, and system-wide comparable net bakery-cafe sales increased 0.7% compared to the same period in fiscal 2015. Two-year Company- owned comparable net bakery-cafe sales increased 6.6%, two-year franchise-operated comparable net bakery-cafe sales decreased 0.3%, and two-year system-wide comparable net bakery-cafe sales increased 3.0%.

The following table sets forth disaggregated Company-owned comparable net bakery-cafe sales using both the Omni-Channel View and Historical View:

Components of fiscal Q4 2016 Company- Owned Comparable Net Bakery-Cafe Sales

Omni-Channel View	Historical View
Price	1.8%	1.8%
Transactions	N/A	-0.7%
Entrées	1.0%	N/A
Mix	0.2%	1.9%
Company-Owned Comparable Net-Bakery-Cafe Sales	3.0%	3.0%

The Company believes the Omni-Channel View better serves investors as its business is undergoing a structural change in mix. Digitally enabled, larger party-size channels, such as delivery, catering, and Rapid Pick-Up have larger checks and more entrées per transaction and are growing disproportionately quicker.

For full year fiscal 2016, Company-owned comparable net bakery-cafe sales increased 4.2%, franchise-operated comparable net bakery-cafe sales increased 0.7%, and system-wide comparable net bakery-cafe sales increased 2.4% compared to fiscal 2015. A schedule of comparable net bakery-cafe sales information is attached to this release as Schedule III.

Bakery-Cafe Margin

Bakery-cafe margin for fiscal Q4 2016 improved by approximately 10 basis points versus fiscal Q4 2015. The improvement was primarily driven by lower food cost due to improved leverage from higher comparable net bakery-cafe sales and benign food cost inflation, accompanied by success in our intensive margin improvement initiatives, partially offset by structural wage increases and costs related to the startup and transition expenses associated with the Company's strategic initiatives.

Bakery-cafe margin for full year fiscal 2016 improved by approximately 40 basis points versus full year fiscal 2015.

Operating Margin

GAAP operating margin for fiscal Q4 2016 declined approximately 40 basis points versus fiscal Q4 2015. As outlined in Schedule IV, non-GAAP operating margin for fiscal Q4 2016 decreased approximately 60 basis points versus fiscal Q4 2015. The decrease in non-GAAP operating margin was primarily the result of a year-over-year increase in general and administrative expenses reflecting higher incentive compensation due to improved year-over-year Company performance and an increase in depreciation and amortization related to the Company's investment in technology and growth initiatives.

GAAP operating margin for full year fiscal 2016 declined approximately 40 basis points versus full year fiscal 2015. As outlined in Schedule IV, non-GAAP operating margin for full year fiscal 2016 also declined approximately 40 basis points.

New Bakery-Cafe Development and AWS

During fiscal Q4 2016, the Company opened 11 new bakery-cafes and its franchisees opened 15 new bakery-cafes. During full year fiscal 2016, the Company and its franchisees opened 93 new bakery-cafes (48 Company-owned and 45 franchise-operated). As a result, there were 2,036 bakery-cafes open system-wide as of December 27, 2016.

Company-owned	Franchise-operated	Total System
Bakery-cafes as of September 27, 2016	903	1,121	2,024
Bakery-cafes opened	11	15	26
Bakery-cafes closed	(12)	(2)	(14)
Bakery-cafes as of December 27, 2016	902	1,134	2,036

Average weekly sales ("AWS") for Company-owned "Class of 2016" bakery-cafes for full year fiscal 2016 was a record $49,745. AWS for franchise-operated "Class of 2016" bakery-cafes for full year fiscal 2016 was $44,982.

A schedule of fiscal Q4 2016 and full year fiscal 2016 AWS, including AWS information for bakery- cafes based on their designation as either a traditional or non-traditional bakery-cafe, is attached to this release as Schedule II. 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.