Papa John’s competes for ‘cautious’ consumers

Fourth-quarter profit, sales rise

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Louisville, Ky.-based Papa John’s restated its financial statements for earnings in fiscal 2009, 2010 and 2011 after discovering an accounting error with a joint venture from 2009. Comparisons to prior net income and earnings per share figures were affected, but revenue and same-store sales figures were not. The company does not expect the restatements to materially impact operating results in future periods.

For the Dec. 30, 2012-ended fourth quarter, Papa John’s net income rose 9.2 percent to $17.4 million, or 74 cents per share, compared with a restated net income of $15.9 million, or 65 cents per share, a year earlier.

Revenue rose 19.9 percent to $367.3 million for the fourth quarter, compared with $306.2 million a year earlier. Papa John’s opened 134 restaurants worldwide in the quarter and drove same-store sales gains of 5.2 percent in North America and 7 percent in its international division.

Full-year net income increased 12.7 percent to $61.7 million, or $2.58 per share, compared with a restated $54.7 million, or $2.16 per share, in fiscal 2011.

Revenue for fiscal 2012 rose 10.2 percent to $1.34 billion, compared with $1.22 billion a year earlier, reflecting a 7.2-percent increase in worldwide store count to 4,163 restaurants and annual same-store sales gains of 3.6 percent in North America and 7.1 percent abroad.

Fourth-quarter and full-year results also benefited from a 53rd operating week in fiscal 2012.

Conservatively bullish on 2013

Papa John’s officials predicted 2013 earnings growth of 10–14 percent per share, to a range of $2.85 to $2.95 per share. The company also projects 2013 same-store sales to rise 5–7 percent, and it aims to open 120 to 135 new restaurants.

The momentum of the brand’s international division was a major factor in that guidance.

“We’ve been able to grow our global footprint due in large part to the solid progress we’re seeing in our international operations,” Schnatter said. “In addition to strong comp sales for the quarter and full year, our international business was profitable in 2012. This is significant on many levels, including the validation that our international business model is improving and that our brand is resonating with consumers worldwide.”

Despite 2013 growth targets in North America of 110 to 125 restaurant openings and an expected same-store sales increase between 1.5–2.5 percent, Papa John’s is expecting flat unit-level profit margins. Chief operating officer Tony Thompson said commodity prices for cheese have eased from their fall 2012 levels, but they are expected to rise before the end of the year.

In North America, Papa John’s operates 648 company-owned units and franchises another 2,556 locations in all 50 states. Its international system comprises 959 restaurants in 35 countries.

Contact Mark Brandau at mark.brandau@penton.com.
Follow him on Twitter: @Mark_from_NRN