Papa John's: Point-of-sale system upgrades challenge 2Q resultsPapa John's: Point-of-sale system upgrades challenge 2Q results

Expenses related to the systemwide rollout of a new point-of-sale system and commodity prices, particularly for cheese, negatively affected Papa John’s International Inc.’s second-quarter profit.

Nonetheless, robust same-store sales boosted revenue by 9.1 percent during the quarter ended June 29, to $380.9 million, compared with $349.2 million in the same quarter last year.

The Louisville, Ky.-based operator and franchisor of the Papa John’s pizza chain also reported a 6-percent increase in North American same-store sales and an 8.6-percent increase in international same-store sales.  

“I couldn’t be prouder of our franchisees and our operators around the world who continue to execute the fundamentals and who continue to deliver on the ‘better ingredients, better pizza’ brand promise each and every day,” said John Schnatter, founder, chairman, chief executive and president of Papa John’s, in a conference call.

However, net income fell 2.9 percent, to $16.7 million. The company’s bottom line was affected by $868,000 in expenses related to the rollout of the chain’s proprietary FOCUS point-of-sale system. As of June 29, the POS system was in place in 383 restaurants, 369 of which are company-owned. Papa John’s said in its earnings report that it expected the majority of installations to be completed by the end of 2014.

As of the end of the second quarter, Papa John’s had a systemwide total of 4,487 units, a net increase of 47 locations for the quarter, and 59 for the fiscal year to date. Of those, 672 restaurants are domestic company-owned locations, 2,614 units are franchised in North America and 1,201 locations are international.

Earnings per share rose to 40 cents, compared with 39 cents a year earlier, owing to a 5.7-percent decrease in outstanding shares.

The company said the costs of the POS system installation would likely decrease income before taxes by approximately $5 million for the year, or 8 cents per share.

The company reaffirmed its earnings per share guidance for the year of $1.64 to $1.72.

Schnatter said in a call discussing earnings that he hoped to have FOCUS in half of the chain’s locations by the end of the third quarter. He said comparing the new POS to the one currently in place, installed in 1995 and 1996, is like “comparing the Razr phone to the iPhone.”

Chief operating officer Steve Ritchie said the system, which requires new hardware, includes a driver dispatch system that uses GPS technology that enables drivers to determine optimal delivery routes. It also has a labor management system “that really takes us to the next level,” and that he expected would drive efficiency.

Commodity prices remained challenging, Schnatter said, particularly for cheese, which had an average price of $2.13 per pound per quarter, compared with $1.78 per pound in last year’s quarter. Cheese is expected to be at an average of $2.08 for the year, “which is a big hit to our P&L,” he said. High pork, beef and green pepper prices in the second quarter also challenged the brand.
 

2Q NET INCOME

Result: $16.7 million, or 40 cents per share
% Decrease: 2.9% (from $17.2 million, EPS rose from 39 cents per share due to a decrease in outstanding shares)

2Q REVENUE

Result: $380.9 million
% Increase: 9.1% (from 349.2 million)

2Q SAME-STORE SALES

% Increase North America: 6%

% Increase international: 8.6%

Source: Company report

Contact Bret Thorn at [email protected].
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