Papa John’s Introduces Key Initiatives in 1Q15
Papa John's Share Price Increases after 1Q15 Earnings Release
Management initiatives
During the quarter, Papa John’s (PZZA) introduced a point of sale system called FOCUS in the domestic markets, which increased the company’s G&A (general and administrative) expenses. Papa John’s digital sales accounted for 50% of domestic sales during the quarter.
Papa John’s also launched PayShare, which allows customers to split their portions of the bill when placing an order. Technology is a critical part of success for pizza chains. Domino’s (DPZ), for example, gets about 45% of its sales in the US from digital platforms. To learn more, read Investing in Domino’s Pizza – It’s All About the Dough.
Starbucks (SBUX) has also pioneered the use of technology and has grown its loyalty program through this medium. SBUX makes up about 3% of the C onsumer Discretionary Sector ETF (XLY), while McDonald’s (MCD) makes up about 4% of XLY.
But besides technological innovation, Papa John’s also launched new products such as the double cheeseburger pizza, and the brownie , which has helped in increasing orders. The Super Bowl also occurred during the first quarter. According to the company, it served one million plus pizzas during the event.
Papa John’s, as well as other restaurant companies such as Chipotle (CMG) and Panera Bread (PNRA), have worked towards offering healthy options on their menu to attract the Millennials. During the earnings call, Papa John’s stated that its products do not contain MSG or trans fat.
Management outlook
On a full-year basis in 2015, the company expects EPS to be in the range of $2 to $2.08, which was increased from the previous target of $1.98 to $2.06. The company also increased its target for same-store sales growth or comps to a range of 3% to 5%, from 2% to 4% previously. The improved guidance helps explain why Papa John’s (PZZA) shares rose after its earnings announcement. We’ll look at this in more depth in the next article.
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