It was ahead of the company's 4Q earnings report and although I'd like to take credit for saying to buy it ahead of the print, I didn't. My positive position really was more longer term, not quarter-specific, as the company fixes many of the 2013 issues, restructures and focuses more on customer service in 2014. Simply put, the risk/reward headed into 2014 is favorable, especially since the company has begun to take aggressive actions to reignite sales and growth throughout the company. The bad news is out, the expectations are low and this is one of the best management teams in the business.
Last year was challenging for Panera, with a deceleration in same-store sales, earnings, margins and unit growth. As a result, it lagged the restaurant group by 25% for the year. Not many were worse. Yum! Brands (YUM) and McDonald's take the credit there, with YUM underperforming by 30% and MCD by 40%. We own and like YUM in Action Alerts PLUS, Jim Cramer's Charitable Trust, but my eyes are also on Panera as well.
The questions for investors are whether Panera's problems are cyclical or secular, whether they are service-oriented issues or competitive and market-share loss issues. I think it's more cyclical and believe the aggressive restructuring efforts that the management has put in place will lead to better transaction growth and a recovery in top- and bottom-line results in the second half of 2014 and into 2015. They are investing heavily in technology, adding labor hours and the mobile initiatives are in very early innings. Even despite its problems, unit growth is still poised to grow 6.5% to 7% for the full year, even in this macro-challenging environment.