Papa is pleased: Papa John's digital sales hit 60%

Papa John's International reported Q1 2017 financials today that pleased the leadership team. About 60 percent of the brand's sales are now digitally based, a news release said.

"We're pleased with our solid start to 2017, with good comparable sales and earnings growth despite a challenging environment for restaurants," Papa John's founder, Chairman and CEO John Schnatter said in the release. "With our digital sales percentage now over 60 percent and several initiatives that will build on our industry-leading quality advantage, we are leveraging our strengths to steadily grow the Papa John's business globally for many years to come."

Highlights for the quarter that ended March 26, 2017 include:

  • Earnings per diluted share of 77 cents, up from 69 cents in the same period last year.
  • North American system-wide comparable sales grew 2 percent, while international sales grew 6 percent.
  • 2017 outlook reaffirmed.

The company said revenues in Q1 grew $20.7 million, or 4.8 percent, on higher comparable sales for North America and International. In addition to the impact of higher volumes, North America commissary sales also increased primarily due to higher cheese prices charged to franchisees.

The consolidated revenue increase is net of the unfavorable impact of foreign currency exchange rates of approximately $3.1 million, which was primarily attributable to the United Kingdom, and the impact of refranchising 42 restaurants in the fourth quarter of 2016.

On higher revenues, consolidated operating income increased $800,000, or 1.8 percent in Q1. Operating income as a percentage of consolidated revenues decreased 0.3 percent to 9.7 percent for the first quarter.

Significant changes in the operating income percentage include:

  • Domestic Company-owned restaurants margin, as a percentage of restaurant sales, decreased 1.6 percent mostly due to increased labor costs, including higher minimum wages and higher delivery costs from higher non-owned automobile claims costs and increased mileage reimbursement costs.
  • International margin, as a percentage of international revenues, increased 1.0 percent, primarily due to higher royalty and fee income.
  • General and administrative costs, as a percentage of consolidated revenues, decreased 0.9 percent based on higher revenues.

Diluted earnings per share increased 11.6 percent to 77 cents for Q1 2017. This increase was primarily due to an increase in net income and a decrease in shares outstanding. Diluted earnings per share was favorably impacted by approximately 3 cents due to the adoption of the new guidance for accounting for share-based compensation. Excluding the impact of this adoption, diluted earnings per share would have increased 7.2 percent compared to first quarter 2016.

The company added 179 net worldwide units over the trailing four quarters, with 1,300 restaurants in the development pipeline as of March 26, 2017. Of those, 200 are planned for North America and 1,100 are expected internationally, with most of those opening in the next six years. 

Topics: Business Strategy and Profitability, Financial News

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