Papa John's Delivers the Mother of All Results
Pizza delivery has been around almost as long as pizza itself, yet Papa John's International , Domino's Pizza , and Yum! Brands' Pizza Hut are growing like it's the latest and greatest thing. That is partly true, since online and mobile ordering from the big three is eating into the mom-and-pop pizza stores and even the smaller regional chains. However, there is an additional reason that emerged in the fourth quarter, and it could mean an earnings surprise when these chains report their calendar first-quarter results.
Papa John's reported fiscal first-quarter results on Feb. 25. Revenue climbed 12.2% to $387.9 million. Domestic systemwide same-store sales exploded 9%. International same-store sales soared 7%. Adjusted earnings per share leaped 32.3% to $0.41.
CEO and founder John Schnatter noted that this is the company's 30th year as a business, 10th year of flat-to-positive same-store sales, and that it has opened its 1,000th international location. He stated, "In the face of increasing competitive pressures throughout the year and a global economy that is still struggling to gain its footing, our global systems continue to excel at the fundamentals and deliver ... on our 'Better Ingredients. Better Pizza.' brand promise throughout the world."
Schnatter credits the company's success with simply a "world-class operations team...world-class service," investments in quality, certain sports sponsorships, and other marketing initiatives.
COO Tony Thompson also pointed out the contribution digital ordering has made to the business lately. He said that 45% of domestic Papa John's sales are now through digital means. He noted that Papa John's is the first national pizza chain to achieve the 45% mark, he expects it will be the first to hit the 50% mark, and the company has already surpassed $5 billion in sales from digital ordering. He reminded everybody that Papa John's was the first to pioneer digital ordering among the national chains back in 2001.
Papa John's may be the first to reach 45%, but Domino's Pizza and Pizza Hut are close behind. Domino's reported that it too hit 45% in digital sales last quarter, and Pizza Hut at last count was at the 40% mark. This suggests that digital ordering is an industry trend and consumer preference. No longer do you need stacks of menus to dig through. Just pull out your smartphone, load up what you need, and your pizza is on its way, already paid for.
But that's been going on and increasing for several years now. Hints about something else that may help pile on the pizza profits for Papa John's and its two rivals were revealed during Domino's Pizza's conference call.
The blizzard of orders
Retail stores and restaurants alike have been reporting weak results and blaming the weather. It's too cold, too much snow, and too dangerous to leave the house. But people still have to eat, right? Get the phone and call Papa John's, Domino's Pizza, or Pizza Hut.
Anybody who has ever worked pizza delivery can tell you that when the weather turns sour, the phones start ringing -- or the bytes start flying -- at a feverish pace.
During the question-and-answer session of Domino's last conference call, CEO J. Patrick Doyle said:
[B]ad weather, extreme weather and it actually can be ... somewhat more helpful for us than the opposite.... So 3 or 4 inches of snow, coming into a market or a lot of rain or particularly cold or particularly hot will in the short term be helpful to us because of the delivery nature of our business.
Sure, if roads are completely closed and the storms are too extreme, you will have days of slow or no deliveries. But those typical "just nasty out" days that leave restaurants empty should keep pizzas at these chains flying out the door.
This is not to say that one quarter makes a company nor that it changes a long-term thesis by much; but look for Papa John's to report a strong first quarter. For Fools already considering Papa John's and trying to decide on an entry time and price, keep this in the back of your mind as you do your research. The first-quarter calendar results for many restaurants may be weak and create potential buying opportunities, but don't necessarily count on that happening with Papa John's.
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The article Papa John's Delivers the Mother of All Results originally appeared on Fool.com.Nickey Friedman has no position in any stocks mentioned. The Motley Fool owns shares of Papa John's International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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