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Papa John's outlines outlook for 2009
December 15, 2008
LOUISVILLE, Ky. -- Papa John's International Inc. projects earnings per share in the range of $1.32 to $1.40 for 2009, excluding results from its franchisee-owned cheese purchasing entity.
The projected earnings guidance includes the impact of the previously-announced franchise support initiatives, CEO transition costs and other events, Papa John's officials said.
Domestic system-wide comparable sales are expected to range from flat to a decrease of 2 percent in 2009, with results for company-owned and franchised units expected to be relatively consistent. Total sales growth for international restaurants is expected to range from 25-30 percent in 2009, due primarily to new unit growth.
The company projects net unit growth in the range of 100 to 140 units, including a net decline of 50 to 70 units domestically and a net increase of 170 to 190 units internationally. This would represent an approximate 2 percent decline in domestic units and an approximate 30 percent increase in international units. A substantial majority of openings worldwide will be franchise units.
Consolidated revenues are expected to be relatively flat in 2009 as compared to 2008 results. The favorable impact of commodity costs on commissary revenues and of international net unit growth is expected to be offset by the unfavorable impact of domestic net unit closings and the refranchising of 63 domestic units in the fourth quarter of 2008.
Consolidated operating margin in 2009 is expected to be approximately 1.2 percent to 1.5 percent lower than 2008 results. The decrease is primarily due to the cost of the previously announced franchise initiatives, commodity and wage rate cost pressures at company-owned restaurants, the impact of net domestic unit closings on royalty and commissary income and CEO transition costs, partially offset by improvement in international operating losses as this business unit continues on track to achieve break-even results in 2010.
Capital expenditures for 2009 are expected to be approximately $30 to $35 million, allocated relatively evenly between growth, cost reduction and ongoing maintenance initiatives. The growth initiatives include new domestic and international restaurants in existing company-owned markets. The cost reduction initiatives include technology-based or other initiatives focused on improving productivity in company-owned restaurants and commissaries.
Operating results for 2009 are expected to be impacted by certain initiatives/costs that are not projected to reoccur in 2010 or to occur only at greatly reduced levels. These incremental 2009 items include suspended collection of the 0.25 percent increase in royalty rate initially scheduled for January 2009, incremental system-wide marketing support, and an increase in anticipated royalty relief or other targeted franchise financial relief. Additionally, CEO transition costs incurred in 2009 are not expected to reoccur in 2010.
The company reaffirmed its guidance that earnings for 2008 would be near the $1.68 low end of the previously announced range, excluding the impact of BIBP and other noted items.
Papa John's 2009 annual meeting will be held on April 30, 2009, at 11 a.m. Eastern time at the company's corporate offices in Louisville, Ky.
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