SHORT TERM TRADE BEST IDEA:

SHORT PNRA

APRIL 10, 2013

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PNRA COMPANY OVERVIEW • Well-positioned bakery-cafe concept

• Three business segments: – 809 Co-Op bakery-cafes

– 843 franchise-operated bakery-cafes

– 24 fresh dough facilities (22 co-op)

• Strong historical Return on Incremental Invested Capital

• Operating free from strong competition (COSI) but we believe competitive environment is changing

• Stable earnings growth aided by pricing power

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STRONG STOCK PERFORMANCE • OPPORTUNISTIC IMMEDIATE-TERM TRADE ON THE SHORT SIDE

• SENTIMENT SWOON

• MAINTAINING COMP MOMENTUM UNLIKELY IN 2H13

• CHANGING COMPETITIVE DYNAMICS

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COMP COULD WEIGH ON MULTIPLE

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IF COMP GROWTH CONTINUES TO SLIDE, MULTIPLE COULD HAVE DOWNSIDE

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CHANGING COMPETITIVE DYNAMICS

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Incremental sales layers have been added since 2009 – media spend and national loyalty program in 2010 Traffic growth has slowed from 2.1% in 2010 to 1.8% in 2011 and 0.8% in 2012. (Consensus is seeking +0.9% traffic growth in 2013) If we were to speculate on possible reasons for this: • Privileged position as one of the few healthy QSR options is being challenged

• Casual Dining getting in on the act with competitive price offerings

• Wendy’s upgrading menu, undercutting Panera prices

• McDonald’s moving to McWrap, marketing aggressively, underscores shift in industry focus in response to millennial demands

• Likely that Panera is in the cross hairs of many traditional QSR management teams as a brand to draw ideas from

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COMPS HAVE BECOME MIX-DEPENDENT

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TRAFFIC PRICE MIX

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CONSENSUS SEES TRAFFIC BOUNCE, MIX MOMENTUM

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Consensus Metrix

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EARNINGS BEING MANAGED? THE BOUNCE-BACK IN SALES GROWTH IS UNLIKELY TO MEET EXPECTATIONS

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PNRA SENTIMENT SWOON

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QUANTITATIVE LEVELS

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RISKS TO OUR THESIS

• Mgmt sales initiatives are more effective than expected (marketing)

• Marketing succeeds in generating positive mix, traffic, price growth

• Competitors fail to take share in “health” sector

• Wheat prices

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THANK YOU

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This presentation was prepared by: Howard Penney and Rory Green