Panera Bread said this week that it is accelerating the roll-out of its new delivery service, where executives believe it can take market share in an estimated $40 billion delivery category. As of the third quarter, 178 company-owned Panera stores (20% of Panera's system) were offering delivery, in addition to 76 franchise units. The company is on pace to have delivery in 15% of its over 2,000 stores by the end of 2016, and in 35% to 40% of stores by the end of 2017.
So far, Panera's foray into delivery -- a category long dominated by the fast-food pizza companies -- looks promising.
In test markets where stores have had delivery for at least six months, Panera is seeing an additional $5,000 a week in sales. That has equated to an eye-popping 10% lift in same-store sales, pointed out Canaccord Genuity analyst Lynne Collier in a new note.
Panera's push into delivery comes alongside its continued implementation of Panera 2.0, a tech-focused initiative that has led to the introduction of tablets in restaurants to speed up the ordering process, as well as enhanced mobile ordering. For Panera, reinventing the restaurant experience is mission-critical, alongside its efforts to improve food quality.
The strategy is "essentially rooted in the belief that we need to be a better competitive alternative, and to do that we have built a new restaurant experience ... and a great deal of innovation in food," said Panera Bread Founder and CEO Shaich in an interview in April.
Shaich added, "There is nothing better than getting salads and sandwiches delivered -- they are cold and people want them. There were people doing billions of dollars in sandwich delivery, even to my own office, because people couldn't leave."
The combination of a growing digital presence and marketing for food free of artificial ingredients helped guide Panera to another solid quarter. Panera reported third-quarter earnings of $1.37 a share, surpassing analysts' estimates of $1.34 a share. Revenue increased 3% to $684.2 million year over year, above Wall Street's projections of $680.5 million.
"We believe the power of Panera's multiyear investment cycle has not only elevated the consumer experience but also its perception as a fresh, healthy, convenient and innovative concept," commented Jim Cramer, TheStreet's founder and manager of the Action Alerts PLUS portfolio, which owns Panera Bread shares.