Papa John's International Inc. projects earnings per share in the range of $1.70 to $1.90 for 2010, excluding the impact from the consolidation of the results of the franchisee-owned cheese purchasing company, BIBP Commodities Inc.
The projected earnings guidance range also includes the accretive impact of the expected execution of a share repurchase authorization throughout 2010. The company has repurchased approximately 1.0 million shares of stock at an average price of $22.52 per share or a total of $23.5 million, and has $34 million remaining available for the repurchase of common stock under this authorization.
Domestic system-wide comparable sales are expected to range from an increase of 1 percent to a decrease of 1 percent in 2010, with results for company-owned and franchised units expected to be relatively consistent. The consumer environment is expected to continue to be very challenging, with the unemployment rate and consumer confidence seen as key indicators for the restaurant industry. Total sales growth for international restaurants is expected to range from 15 percent to 20 percent in 2010, due primarily to new unit growth.
Worldwide net unit growth in 2010 is expected to be in the range of 140 to 180 units, including an increase of 40 to 60 units domestically and 100 to 120 units internationally. This would represent an approximate 1 percent to 2 percent increase in domestic units and an approximate 16 percent to 18 percent increase in international units. A substantial majority of openings worldwide will be franchise units.
Due to a change in the accounting requirements for variable interest entities, Papa John's will no longer consolidate the operating results of certain franchise restaurants. Excluding the unfavorable impact on revenues of the deconsolidation of these franchise restaurants, consolidated revenues are expected to increase approximately 3 percent to 5 percent in 2010 compared to 2009, due to worldwide unit growth, increases in the royalty rate and anticipated commodity cost increases resulting in higher commissary sales prices.
Consolidated operating margin in 2010 is expected to be approximately 1 percent higher than 2009 results. The increase is primarily due to the increase in the domestic royalty rate from 4.25 percent to 4.50 percent in September 2009 and the additional increase to 4.75 percent planned for January 2010; a reduction in the anticipated levels of discretionary marketing support for the domestic franchise system in 2010; and the full-year impact in 2010 from the September 2009 reduction in corporate support staff.
Capital expenditures for 2010 are expected to be approximately $40 to $45 million with primary emphasis on certain technology-based initiatives focused on enhancing the online ordering platform and improving productivity in company-owned restaurants and commissaries, and the completion of a commissary in the United Kingdom.
The combined operating results of company-owned restaurant and domestic commissary business units are expected to be relatively flat in 2010, as the favorable impact of additional units on the commissary operations is expected to be substantially offset by the impact of higher commodity costs on restaurant margins.
International operations are expected to report an increased operating loss primarily due to start-up costs associated with company-owned commissary in the United Kingdom during 2010. The company anticipates that international business will achieve break-even results in 2012.
User Comments