Papa Johns’ third quarter earnings results proved new chief executive officer Todd Penegor, who came on board in August, has his work cut out for him. The pizza chain reported Thursday a -3.1% decline in revenue, and a same-store sales decline of -6% in its North America system. International same-store sales were down -3% versus a year ago.
Amid the negative numbers, Penegor said the company is “acting with urgency to strengthen the brand” to improve its value perception with consumers, as well as its digital and loyalty experience.
Penegor outlined his five key elements to get the company positive, including:
- Focusing on core products and improving innovation across a barbell menu “Consumers know us for ‘Better Ingredients, Better Pizza,’ and we need to deliver this consistently every day," he said.
- Amplifying marketing messaging. Penegor said the chain’s “Better Get You Some” campaign launched earlier this year has traction, but needs to be enhanced to communicate why customers should choose Papa Johns.
- Investments in the tech stack to enable commercial and operational efficiencies. Penegor said the company simply needs to make it easier for customers and for franchisees to do business.
- “Differentiating the customer experience to meet and exceed the convenience, value, and quality expectations of customers’ channel of choice by simplifying processes, optimizing the menu and employing technology," he said.
- And, partnering with and evolving the franchise base to be “growth oriented.” One way Papa Johns is doing this is by reducing the build out costs of its stores and more information will be shared, Penegor said.
Penegor said the greatest near-term opportunity to move the needle against its peers – including the two biggest pizza competitors who outperformed Papa Johns in Q3 – is through investing and modernizing the tech stack, including its loyalty program that will feature updates in Q4. Those updates include the ability for members to unlock rewards faster.
“How do we make sure the loyalty program is relevant to bring (customers) back for second and third visits? That’s a huge opportunity,” he said. “We believe converting points to Papa Dough in smaller increments can lead to more immediate gratification. That’s the first step as we make more improvements. We see so much opportunity here for driving that all-important second purchase.”
As for the long-term? Penegor said Papa Johns needs to get back to its playbook – “making the best pizzas in the business, making sure there aren’t a lot of rhythm breakers in restaurants, focusing on core quality, and, ultimately, how do you tell the story of what’s unique and different?”
Though it’s early days for Penegor’s strategy, Papa Johns reported sales and transaction improvements through the quarter and into Q4 on both an absolute and comp basis.
“We’re starting to bend transaction trends, but we still have work to do,” he said, adding that the company is going to take learnings from Q3 and Q4 and apply them to ensure there is a strong barbell and innovation calendar next year.
“We need to make sure we get back into the consideration set to be competitive on price, but we also need to amplify messages on quality and why we’re different. We haven’t paid that story off to make sure the consumer has us top of the list,” Penegor said.
Despite near and long-term plans in place, executives cautioned that the current challenges will continue throughout the remainder of the year and into 2025.
“Consumers have become more deliberate in managing their overall ticket and are showing preference for brands offering compelling value,” chief financial officer Ravi Thanawala said during the call. “Throughout the third quarter, we shifted efforts toward initiatives that improved value perceptions while protecting brand positioning and that had a positive impact on transactions. We’re starting to gain traction.”
New chief marketing officer
Also Thursday, Papa Johns named Jenna Bromberg as its new chief marketing officer. She joins the company from Carter’s Inc., where she served as vice president of brand marketing and creative. Prior, she worked as director of core brand marketing at Pizza Hut.
She joins Kevin Vasconi, who worked with Penegor at Wendy’s and joined the pizza chain in August as chief digital and technology officer. The chain also expanded chief financial officer Thanawala’s role to include the international business and chief development officer Joe Sieve’s role to include North American and international development.
Papa Johns third quarter by the numbers
- North America same-store sales were down -6%, with domestic company-owned stores down -7% and franchised stores down -5%
- International same-store sales were down -3% versus Q3 2023
- Global systemwide sales were $1.19 billion, a -3% decrease compared to the year prior driven by lower comp sales
- Total revenues of $507 million were down -3% versus the year prior, driven by lower international revenues resulting from the refranchising and closure of company-owned restaurants and lower sales at domestic company-owned restaurants
- 25 net new openings during the quarter. North America remains on track for more than 100 gross restaurant openings in fiscal year 2024
Contact Alicia Kelso at [email protected]
