NPC International Inc., the largest Pizza Hut franchisee, saw its business “gain some footing” in the second quarter, and expects the rest of the year to be devoted to redefining the brand, executives said Monday.
Jim Schwartz, president and CEO of Overland Park, Kan.-based NPC, said the company’s 1,262 Pizza Hut units benefited from new promotions such as the Big Flavor Dipper pizza and $6.99 Any Pairs deal in the quarter.
“We managed to gain some footing in the Pizza Hut business this quarter,” Schwartz said during a call Monday with analysts, but “significant work” remains.
In the second quarter ended June 30, Pizza Hut’s same-store sales were flat, rolling over a decrease of 5.6 percent in the same quarter last year. Same-store sales at NPC’s Wendy’s units slipped 0.5 percent in the 87 locations it acquired in fiscal 2013, the company said in an earnings release Friday.
NPC swung to profit in the second quarter, reporting net income of $100,000, compared with a net loss of $1.4 million in the same quarter last year.
“It remains clear to us that we still have much work to do in defining Pizza Hut’s go-forward brand positioning so that it is both insightful and motivating in this very competitive category,” Schwartz said.
The company was “moderately pleased with the sequential improvement in our top-line performance,” he said. However, he added, “While flat comparable-store sales is clearly not our internal goal, it is, in fact, a significant step in the right direction.”
Schwartz added that NPC has been working with Pizza Hut, a division of Yum! Brands Inc., on its path forward. “We therefore believe that 2015 will remain to be a year of redefining Pizza Hut,” he said.
Troy Cook, NPC chief financial officer, told analysts: “Our second-quarter Pizza Hut results were strongly influenced by a favorable commodity environment and were assisted by a stabilized top line.” The company expects to see commodity deflation in its Pizza Hut business of between 4 percent and 6 percent, executives said.
Last week, the company also closed one of three call centers as it continues to see customers shift pizza orders from traditional telephone to online and handheld devices. Schwartz said 50 percent of the growth in online orders is through handheld devices, making one of the call centers “obsolete.”
The closure of the Springfield, Mo., facility, which opened in 1986, leaves the company with two remaining call centers, executives said, in Bartlett, Tenn., and Pittsburg, Kan., “for redundancy,” according to Cook. “We can pass orders back and forth between the two.”
The call center’s closure should save the company between $300,000 and $400,000, Cook added.
Through acquisitions, NPC now has 143 Wendy's units in five states, which has added to an increase in EBITDA, or earnings before interest, taxes, depreciation and amortization.
“Our Wendy’s business continued its strong performance and contributed notably to our EBITDA growth this quarter on the strength of margin expansion and the incremental benefit of stores acquired in early third quarter of 2013,” Cook said.
NPC executives said they were open to growth and acquisition in its Wendy’s business.
Privately held NPC is a subsidiary of NPC Restaurant Holdings LLC, which has guaranteed NPC’s 10.5 percent senior notes and reports some financial data with the Securities and Exchange Commission.
NPC has Pizza Hut units in 28 states.
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