HIGHLIGHTS

 --  Q2 2009 net income up 28% over Q2 2008 --  Q2 2009 operating margin up 140 bps over Q2 2008 --  Q2 2009 system-wide comparable bakery-cafe sales flat, net of the Easter     impact --  Company-owned comparable bakery-cafe sales up 2.8% for the first 27 days     of Q3 2009 --  Q3 2009 EPS target set at $0.55 to $0.59 (up 22% to 31% versus Q3 2008) --  FY 2009 EPS target tightened to $2.60 to $2.68 (up 17% to 21% versus FY     2008 with one less week)      

Panera Bread Company (NASDAQ: PNRA) today reported net income of $20 million, or $0.65 per diluted share, for the second quarter ended June 30, 2009, which included a $0.02 per diluted share charge for the write-off of smallwares related to the rollout of new china and a $0.02 per diluted share charge for reserves associated with a state sales tax audit. These results compare to net income of $16 million, or $0.52 per diluted share, for the second quarter ended June 24, 2008, and represents a 28% year-over-year increase in net income.

For the twenty-six weeks ended June 30, 2009, net income was $37 million, or $1.21 per diluted share. These results compare to net income of $28 million, or $0.93 per diluted share, for the twenty-six weeks ended June 24, 2008, and represents a 33% year-over-year increase in net income.

The Company's second quarter and year-to-date fiscal 2009 consolidated statements of operations and margin analysis are attached as Schedule I. The following tables set forth, for the periods indicated, certain items included in the Company's consolidated statements of operations (in thousands, except per share data and percentages):

                                         For the 13 Weeks Ended                                         -----------------------                                          June 30,    June 24,   Percentage                                            2009        2008       Change                                         ----------- ----------- ---------- Total revenue                           $   330,794 $   320,868          3% Net income                              $    20,029 $    15,706         28% Diluted earnings per share              $      0.65 $      0.52         25% Shares used in diluted EPS                   30,959      30,338                                         For the 26 Weeks Ended                                         -----------------------                                          June 30,    June 24,   Percentage                                            2009        2008       Change                                         ----------- ----------- ---------- Total revenue                           $   651,503 $   625,847          4% Net income                              $    37,461 $    28,146         33% Diluted earnings per share              $      1.21 $      0.93         30% Shares used in diluted EPS                   30,849      30,240 

Second Quarter Fiscal 2009 Business Review

Comparable Bakery-Cafe Sales Growth

In the second quarter of fiscal 2009, system-wide comparable bakery-cafe sales decreased (0.4)% versus the comparable period in fiscal 2008 (Company-owned comparable bakery-cafe sales decreased (0.7)% and franchise-operated comparable bakery-cafes decreased (0.2)%). These second quarter comparable sales results were impacted negatively by approximately 0.5% from the shift of the Easter holiday from the first quarter of fiscal 2008 to the second quarter of fiscal 2009. Thus, excluding the impact of the Easter shift, the Company and its franchisees experienced essentially flat comparable bakery-cafe sales growth for the second quarter of fiscal 2009.

The Company-owned comparable bakery-cafe sales decline of (0.7)% in the second quarter of fiscal 2009 included the following year-over-year components: transaction decline of (1.4)% and average check growth of 0.7%. Average check growth in turn was comprised of retail price increases of 3.0% and negative mix impact of (2.3)%. Transaction growth was primarily the result of new product introductions, offsetting negative mix impact, which was primarily the result of continued weakness in year-over-year sales in the Company's high average-check catering business and strong transaction growth in the lower average check breakfast business.

Operating Margin Improvement

In the second quarter of fiscal 2009, the Company generated operating margin improvement of approximately 140 basis points compared to the second quarter of fiscal 2008. This was primarily a result of the year-over-year benefits in wheat costs and the Company's category management initiatives.

New Unit AWS and Development

In the second quarter of fiscal 2009, average weekly sales ("AWS") for Company-owned new units decreased to $35,580 compared to $35,776 in the second quarter of fiscal 2008. AWS for Company-owned new units year-to-date through the second quarter of fiscal 2009 was $37,314 compared to $36,640 in the same period of fiscal 2008. A schedule of the Company's second quarter fiscal 2009 AWS is attached as Schedule II.

During the second quarter of fiscal 2009, the Company and its franchisees opened 14 new bakery-cafes system-wide, resulting in 1,345 bakery-cafes open system-wide as of June 30, 2009. The breakdown of Company-owned and franchise-operated bakery-cafes are as follows:

                                       Company-    Franchise-     Total                                        owned       operated      System                                      -----------  -----------  ----------- Bakery-cafes as of March 31, 2009            564          771        1,335 Bakery-cafes opened                            4           10           14 Bakery-cafes closed                           (2)          (2)          (4)                                      -----------  -----------  ----------- Bakery-cafes as of June 30, 2009             566          779        1,345                                      ===========  ===========  =========== 

Third Quarter 2009 Outlook

Establishing Third Quarter 2009 Targets

Diluted EPS Target

For the third quarter of fiscal 2009, the Company is targeting earnings per diluted share of $0.55 to $0.59 versus $0.45 per diluted share in the third quarter of fiscal 2008. If the Company meets this target, diluted earnings per share will grow 22% to 31% in the third quarter of fiscal 2009 versus the third quarter of fiscal 2008. This third quarter of fiscal 2009 diluted earnings per share target includes the following key assumptions:

Comparable Bakery-Cafe Sales Growth

The third quarter of fiscal 2009 target assumes Company-owned comparable bakery-cafe sales growth of 2.5% to 3.5%, consisting of transaction growth of 1.5% to 2.5% and average check growth of approximately 1.0% (which in turn consists of an approximately 2.25% year-over-year price increase and negative mix impact of approximately (1.25)%).

The Company is announcing today that through the first 27 days of the third quarter of fiscal 2009 (beginning July 1, 2009 and ending July 27, 2009), comparable bakery-cafe sales of Company-owned bakery-cafes have grown approximately 2.8% and comparable bakery-cafe sales of franchise-operated bakery-cafes have grown approximately 1.8%.

Operating Margin Improvement

In the third quarter of fiscal 2009, the Company is targeting 50 to 100 basis points of improvement in operating margin.

New Unit AWS and Development

The Company is targeting approximately 15 to 20 system-wide new unit openings in the third quarter of fiscal 2009 with AWS for new Company-owned units assumed to be consistent with the Company's full year target of $36,000 to $38,000.

Full Year 2009 Targets

Tightening Full Year Fiscal 2009 Targets

The Company is today tightening its earnings per diluted share target for full year fiscal 2009 to $2.60 to $2.68 per diluted share. The sequentially improving Company-owned comparable bakery-cafe sales growth has provided management with the confidence to raise the bottom end of its previously disclosed full year fiscal 2009 diluted earnings per share target from $2.55 to $2.60 per diluted share while modestly raising the midpoint of its previously communicated full year diluted earnings per share target to $2.64. This compares favorably to earnings per diluted share of $2.22 in full year fiscal 2008. If the Company meets its revised full year target, it would generate diluted earnings per share growth of 17% to 21% in full year fiscal 2009. Please note fourth quarter fiscal 2009 diluted earnings per share growth targets will be impacted by the fact that fourth quarter fiscal 2008 results consist of 14 weeks as compared to 13 weeks in the fourth quarter of fiscal 2009.

The full year fiscal 2009 diluted earnings per share target includes the following updated key assumption: the full year fiscal 2009 target for Company-owned comparable bakery-cafe sales has been updated to a range of 1.25% to 2.0% growth to reflect the continued trend of stronger than expected transactions while absorbing year-over-year softness in the catering business.

Concluding Comment

Chairman and Chief Executive Officer Ron Shaich commented: "We are very pleased to have delivered another quarter of solid performance. We have been highly focused on building competitive advantage and growing transactions in the face of this recession. Thus we are quite gratified to see our initiatives generating sequentially better Company-owned comparable bakery-cafe sales growth each period for the last four periods. In fact, we believe that the strong comparable bakery-cafe sales growth we have produced in Company-owned cafes since the rollout of our recent salad celebration in early June is an indication of the success of our efforts. Indeed, the momentum we are experiencing in Company-owned comparable bakery-cafe sales growth has given us the confidence to continue investing in an improved guest experience despite the recession and, as well, greater confidence in our ability to deliver Q3 results up 22% to 31% and our full year 2009 targets."

Notes

The Company will discuss second quarter fiscal 2009 results, preliminary comparable bakery-cafe sales results for the first twenty-seven days of the fiscal 2009 third quarter, and third quarter and full year fiscal 2009 targets and business outlook in a conference call that will be broadcast on the Internet at 8:30 A.M. Eastern Time on Wednesday, July 29, 2009. To access the call or view a copy of this release, go to http://www.panerabread.com/investor. Access to the call will be made available for 14 days after the call, and the release will be archived for one year.

Comparable bakery-cafe sales percentages are non-GAAP financial measures, which should not be considered in isolation or as a substitute for other measures of performance prepared in accordance with Generally Accepted Accounting Principles, or GAAP, and may not be equivalent to comparable bakery-cafe sales as defined or used by other companies. We do not record franchise-operated bakery-cafe sales as revenues. However, royalty revenues are calculated based on a percentage of franchise-operated bakery-cafe sales, as reported by franchisees. We use franchise-operated and system-wide sales information internally in connection with store development decisions, planning, and budgeting analyses.