Panera Bread Co (PNRA): A Restaurant Stock to Sink Your Teeth Into

The third retail chain I would like to discuss is specialty retailer Zumiez Inc. (NASDAQ:ZUMZ)  . I’ve seen the retailer of outdoor sporting goods, particularly action sports, in Manhattan and found that it operated exactly 500 stores as of this February.

Skateboarding, surfing, snowboarding, and motocross have passionate followings, and Zumiez is there to meet their needs better than larger sporting goods outlets would. Apparently, too, the activities are attracting more and more participants, based on the rising same-store revenues and overall rapid sales improvements.

Management is intent on building its presence further, with plans to add 58 stores in 2013. Store expansion, especially when combined with strengthening comps are typically a good sign. Zumiez will need to stabilize margins, as currently spending on e-commerce initiatives are a drag on the bottom line. Product margins are healthy at more than 30% and thus I believe the company can continue to generate profit growth at a decent rate. If so, the shares could well remain on a recovery path.

Fool’s Summary

Personal customer experiences influenced this review of several retail stocks. In all, the three have positive outlooks and are recommended holdings.

What I believe separates a good retailer from a challenged one is that it can expand profitably without cannibalizing itself or aiming to extend itself too far. Higher-than-average returns on invested capital, a factor shared by two of the three (BBBY and ZUMZ) can be a positive factor. Panera Bread Co (NASDAQ:PNRA) should fare well as it continues to rapidly expand and grow its same-store sales through in-store improvements.

Damon Churchwell has no position in any stocks mentioned. The Motley Fool recommends Bed Bath & Beyond and Panera Bread. The Motley Fool owns shares of Panera Bread.

The article A Restaurant Stock to Sink Your Teeth Into originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.