For the past five years, Panera (PNRA) has been on a steady climb upwards. More recently, though, the company has been slipping.

In the second quarter, revenues came to $589 million, which missed the Wall Street estimate of $596 million. Earnings were also off the mark, coming to $1.74 per share vs a consensus forecast of $1.77 per share. For the cherry on top, the company also cut its full-year outlook thanks to declining sales-growth at company-owned cafes.

Is the slowdown temporary, or is it something that has longer-term implications? To see, let’s take a look at the pros and cons:

Pros

Differentiated. Even with its relatively affordable menu, Panera has always been focused on quality. At the heart of the company is, of course, its handcrafted artisan bread, which is baked fresh every day. This is actually no easy feat. Keep in mind that the company operates 23 facilities that deliver fresh dough every day. There is also a leased fleet of temperature-controlled trucks. All in all, the supply-chain is a big competitive advantage. Plus, Panera has also continued to invest in product innovation.

MyPanera. This is the rewards program, and it has tremendous scale: about 14.5 million members. This compares to about 11 million a year ago. And while MyPanera is really a cost-effective marketing channel (email), Panera has also invested heavily in technology to personalize offers to customers that are based on prior behavior. In a way, it’s about leveraging Big Data.

Economics. They are certainly attractive as well. The typical location costs about $1 million to build out and the average sales are roughly $2.4 million. More importantly, the margins are juicy, with EBITDA at about $500,000. As a result, Panera is a big cash generator.

Cons

Costs. While commodities prices have remained restrained, they still are growing at about 1.5% to 2% per year. To deal with this, Panera generally increases prices on its menu items to account for the costs. It’s worked so far. But at what point may this start to lower demand? The results from the last quarter suggest there are already signs that this may be happening.

Competition. Because of the growth, the fast-casual space has gotten more crowded. Even companies like Wendy’s (WEN) are trying to eat Panera’s lunch, with offerings like flatbread sandwiches. But perhaps the biggest problem for Panera is Starbucks (SBUX), which has been aggressively adding items like sandwiches and salads. The acquisition of La Boulange has also added a nice line of pastries and baked goods.

Marketing. This has not been a priority for Panera. For the most part, the company has grown because of word-of-mouth. But Panera realizes that it needs to rethink this approach. Yes, the company is now looking at ramping up its advertising and marketing, such as on radio and television. While this is a good idea, there will likely be short-term pressures on margins. Plus, it is usually takes lots of tweaking to get the right message that resonates with customers.

Verdict

Investors definitely need to be concerned about Panera’s latest quarter. It’s probably not a temporary thing. The company is undergoing some major changes and must deal with more competition. The menu pricing may also be an issue.

In other words, Panera may have a couple more quarters of weakness as the company tries to work things out. If so, the stock may come under more pressure.

That is, the cons outweigh the pros on the stock for now.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.