Customers kept rewarding Papa John’s International, Inc. (PZZA, Financial) with their sampling and loyalty in the first-quarter fiscal 2015 also. After having exited fiscal 2014 with solid numbers, Papa John’s started fiscal 2015 on a strong footing. The company posted better-than-expected first-quarter fiscal 2015 results earlier this month.
On the back of comparable-store sales, or comps, gain of 6.4% and 6.5% year over year at International and North American stores, respectively, consolidated sales came in at $432.3 million, representing a year-over-year growth of 7.7%. Papa John’s comfortably beat consensus estimates on top-line by 4.2%.
On the back of estimate-beating top-line growth, adjusted earnings per share increased 22.2% year over year to $0.55. Analysts’ were expecting earnings of $0.53 per share.
The restaurant company declared a dividend of $0.14 per share.
Looking ahead
Papa John’s was the pioneer of digital ordering in the pizza industry and currently digital ordering in domestic market constitutes 50% of sales. In fact, Papa John’s was the “First to 50” percent total digital sales. Recently the company revamped its website to make it easier for customers to find nutritional details of their favorite Papa John's products.
On digital initiatives, the company has almost completed the rollout of new point-of-sale system – FOCUS – and it expects to see a very positive impact on system-wide store level operations, while driving multiple store level efficiencies. Many stores have already experienced improvements in order speed, accuracy, delivery service and team member training. Going forward, this will drive efficiencies and profitability.
In the international markets, Beijing remains a priority and still is a work in progress. Papa John’s focus is on international expansion, and China remains an important market in its internal quest for growth. The company has done exceedingly well in the U.K., where it is now approaching the 300 stores mark, and brand strength is growing every year.
Product innovation is another growth driver. During the quarter, Papa John’s new brownie was well received by customers. Also, the company added bacon to its popular double cheeseburger pizza, which once again helped deliver a very solid Super Bowl. This year Papa John’s delivered over 1 million in less than 24 hours, making it the best day of the year. Customers keep returning for the same, thus driving sales.
Outlook got a lift
As a result of the strong first-quarter results, the company revised upwards its earnings for fiscal 2015. The earnings are now expected to be in the range of $2.00 to $2.08 versus $1.98 to $2.06 guided earlier.
North America and International comps are expected to be in the range of 3% to 5% and 5% to 7%, respectively.
Final take
Papa John’s has rallied strongly and it is trading near its 52-week high. The company is delivering strong results consistently. However, it still has a lot to do in China, where the management has said it is still a work in progress, and I see no reason why it will not succeed. Once it cracks the China's market, growth will get a further boost.
Hence, the stock is a buy for the long term.
