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Module 13 Panera Bread

Module 13 Panera Bread. Yiwen Lin. Agenda. Full-information forecasts of sales growth Full-information forecasts of enterprise profit margin Full-information forecasts of enterprise asset turnover Parsimonious forecasts DCF Model REI Model AGR Model Adjustments.

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Module 13 Panera Bread

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  1. Module 13Panera Bread Yiwen Lin

  2. Agenda • Full-information forecasts of sales growth • Full-information forecasts of enterprise profit margin • Full-information forecasts of enterprise asset turnover • Parsimonious forecasts • DCF Model • REI Model • AGR Model • Adjustments

  3. Full-information forecasts of sales • Panera’s MD&A

  4. Panera’s forecasted sales

  5. Full-information forecasts of enterprise profit margin • Bakery-café sales: ranges from 87.4% to 88.4% from 2011 to 2013. The increase in net bakery-café sales was primarily due to opening of new company-owned bakery-cafes and the acquisition of franchise-operated bakery-cafes. Since Panera disclosed its intent o expand, a forecast of 89.0% continue going forward seems reasonable. • Costs and expenses: most of the cost of food and paper products increase was due to shift in product mix towards higher ingredient cost products. The labor expense roughly stays around 26.30% for the past three years. With the potential of improved leverage from higher comparable sales and wage discipline. A steady rate at 26.34$ seems reasonable. Occupancy cost and other operating expenses remained roughly around 6.2% and 12.6% for the past three years, respectively. The main reason for the shift is higher real estate taxes, increased marketing expense, and increased repair and maintenance expenses. Therefore, the forecasts from 2016 thereafter are 6.23% and 12.64%, respectively.

  6. Full-information forecasts of enterprise profit margin • Fresh dough and other product cost: The percentage increased in 2012 and decreased in 2013. The driving force was primarily the result of the year-over-year change in ingredient costs and leverage from new bakery-cafes. Given the uncertainty of these factors, a roughly 5.8% ratio seems reasonable. • Depreciation and amortization: Based on financial information given in the financial statements, the ratio will remain at 4.3%. • General and administrative expenses: The expense continued to decrease from 2011. The primary reason was the result of lower incentive compensation and improved leverage from higher comparable net bakery-café sales. Given the decreasing pattern, a 5.3% forecast is reasonable. • Income taxes: the change in effective tax rate was primarily driven by adjustments of previously recorded tax expenses, the settlement of tax audits, and permanent benefits recognized in the current period and valuation allowance. The ratio ranges from 4.6% to 5.1%. Therefore, a forecast of 5.2% in the future is utilized.

  7. Full-information forecasts of enterprise profit margin

  8. Full-information forecasts of enterprise asset turnover • Trade accounts receivable: net consists primarily of amounts due from franchisees for purchases of fresh dough and other products, royalties and receivables from credit card and catering on-account sales. Take an average of 0.20 and continue forecast at 0.20 • Other accounts receivable: consisted primarily of income tax refunds, gift cards, and tenant allowances. Steady percentage at 0.24. • Inventories: for Panera, the amounts for each inventory type relative to sales have been relatively stable in recent years. Therefore, we will assume that the trend continues in future periods. • Deferred tax assets: financial statement footnotes only provide limited information regarding the line items. Since the amounts of each account relative to sales have been relatively stable in recent years. Therefore, we assume that the trend continues in future periods

  9. Full-information forecasts of enterprise asset turnover • Goodwill: as Panera did not become aware of any impairment indicators subsequent to the date of the annual assessment, they determined there was no impairment as of 2013. We assume it will continue at a level of 5.7 percent of sales as observed in 2013. • Other intangible assets: there was no impairment loss recorded as of 2013. Therefore, we assume these line items will continue at their respective percentage of sales as observed in 2013. • Account payable: it has risen as a percent of sales in 2013 from 5% to 8%. Presumably this is due to the timing of payments. We assume that Panera will continue to maintain accounts payable at 6 percent of sales going forward. • Accrued expenses: Panera only disclosed limited information regarding the breakdown of line items. We assume that Panera will continue to maintain the same ratio/or an average of past years of sales going forward.

  10. EATO Forecasts

  11. EATO Forecasts

  12. PARSIMONIOUS FORECASTS

  13. DcfmODEL

  14. REI MODEL

  15. ARG MODEL

  16. Adjustments • Mid year adjustment: • Per share: • Reference stock price as of 01/02/2014: $176.07 • The company was overvalued by 59.66%

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