Papa John's finds success in local store marketing efforts

Louisville, Ky.-based Papa John's International Inc. announced its financial results for the first quarter ended March 25, which included a systemwide comparable sales increase of 1.1 percent for North America and an 8.4 percent increase for international locations.

Domestic company-owned restaurant sales jumped 3 percent, while North American franchised restaurants were up 0.5 percent.

During this morning's earnings call, Andrew Varga, chief marketing officer, pointed out that corporate-owned stores benefited significantly from a local-store marketing strategy.

"Corporate stores are at top of game with local store marketing, and they set a great example for the franchisees to get on board. This is a solid example in helping the entire system get better at something we think is important to drive results," he said. "(Franchisees) are certainly more active in doing things corporate stores have done for years (such as local marketing) and it's starting to pay off."

The chain's national marketing efforts also provided a lift during the quarter, particularly from Papa John's NFL sponsorship and Super Bowl Coin Toss promotion.

"The promotion certainly provided great visibility for the brand and positive awareness for consumers. In the early stages it helped us gain more enrollees of our Papa Rewards," Varga said.

The company will not comment on sales figures driven by the promotion for competitive reasons. Varga added that the company will perhaps add more activities related to this promotion and "harness more power from the program."

John Schnatter, Papa John's founder, chairman, and chief executive officer, reiterated the benefits of the brand's premium positioning amidst a highly competitive, deep discounting segment.

"Everybody wants to own our position; it's a quality position. It takes time and costs money and most companies aren't willing to do that. Our brand perception is very, very good," he said. "Since it's (Kentucky) Derby Week, I'll say it's not a game of jockeys, it's a game of horses and we have the best horse."

Additional highlights for Q1 include:

  • First quarter earnings per diluted share of $0.69 in 2012 ($0.79, excluding the net impact of a previously announced marketing incentive contribution, or an increase of 23.4 percent over earnings per diluted share of $0.64 in 2011);
  • 50 worldwide net unit openings during the quarter;
  • 2012 earnings guidance increased to $2.40 to $2.50 per diluted share and increased to 2.5 to 4.5 percent for international comparable sales;
  • First quarter 2012 revenues were $331.3 million, a 6.0 percent increase from Q1 2011 revenues of $312.5 million;
  • First quarter 2012 net income was $16.7 million ($19.2 million excluding a net after-tax expense of $2.4 million for a previously announced marketing incentive contribution), compared to first quarter 2011 net income of $16.4 million.

"We had an excellent first quarter," Schnatter said. "Our operators delivered solid comparable sales results rolling over very strong Q1 2011 results, making our two-year combined Q1 comparable sales 7.2 percent in North America and 14 percent internationally. When you combine that performance with our 50 worldwide net unit openings, the year is off to a terrific start."

Driving those sales in the quarter was an increased focus on online ordering. Varga said the platform now accounts for more than 35 percent of the company's sales.

International, overall footprint

Papa John's 50 net new units is its most in a quarter since 2000. The company is projected to have 240-280 new units for the full year.

It also recently announced the acquisition of 50 franchised restaurants in the Denver and Minneapolis markets.

Internationally, Schnatter said, the momentum has continued for the company, with comp sales over 8 percent despite strong competition overseas.

International revenues increased $4.1 million, or 32.1 percent, primarily due to an increase in the number of restaurants and an increase in comparable sales of 8.4 percent calculated on a constant dollar basis.

"There is no doubt we have to be successful in China and India, but we don't want to put all of our eggs in one basket that could bust," Schnatter said. "We believe international has a bright future."

The company plans slow and steady international growth, with a focus on emerging markets.

Read more about operations management.

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