Papa John’s(US:PZZA)2022-05-05 16:14Financial Data and Key Metrics Changes - In Q1 2022, global system-wide sales increased by 5.3% in constant currency to $1.3 billion, following a 26.6% increase in the previous year [8][28] - Comparable sales rose by 1.9% in North America and 0.8% internationally, compared to prior year gains of 26.2% and 23.2% respectively [8][28] - Consolidated revenue increased by 6% to $542.7 million, driven by positive comparable sales and unit growth [28] Business Line Data and Key Metrics Changes - North America comparable sales were up 2.8% across franchisee restaurants but down 1.2% in company-owned restaurants, reflecting localized economic differences [28] - International comparable sales increased by 0.8%, with strong performance in Asia and Latin America, partially offset by weaker results in Europe, particularly the UK [29] Market Data and Key Metrics Changes - The company opened 62 net new units worldwide in Q1, contributing approximately half of the system-wide sales gains [9][23] - The company expects to raise its outlook for unit growth in 2022 to 280 to 320 net units, up from a previous estimate of 260 to 300 [26][27] Company Strategy and Development Direction - The company is focusing on a differentiated strategy that includes menu innovation, digital engagement, and premium positioning to drive sustainable growth [10][15] - The launch of new products, such as the New York Style crust and Epic Pepperoni Stuffed Crust, is aimed at enhancing customer engagement and driving sales [11][12] - The company is also expanding its loyalty program, Papa Rewards, to target price-sensitive customers while maintaining premium offerings for less price-sensitive segments [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current inflationary environment and maintain positive comparable sales in the second half of 2022 [25][36] - The company anticipates that North America comparable sales will be slightly positive in Q2 and continue to be positive for the remainder of the year [25][36] - Management highlighted the importance of strategic pricing actions to offset rising commodity costs while retaining customer momentum [17][38] Other Important Information - The company reported a GAAP operating income of $14.4 million for Q1 2022, down from $46.9 million a year ago, primarily due to special items related to refranchising and international sanctions [30][31] - Adjusted earnings per diluted share rose to $0.95 from $0.91 a year ago, reflecting the impact of share repurchases and tax benefits [34] Q&A Session Summary Question: Labor availability and third-party delivery challenges - Management acknowledged ongoing staffing challenges but expressed confidence in their ability to meet customer demand through partnerships with third-party delivery services [42][43] Question: Margin outlook and EPS growth - Management confirmed expectations for slightly lower margins due to inflation but maintained a positive outlook for EPS growth in the mid to high single digits [49][50] Question: Development guidance and international growth - Management indicated that approximately two-thirds of the new unit growth will be international, with a strong pipeline for future development [59][60] Question: Pricing strategy and consumer sentiment - Management noted that franchisees had implemented price increases earlier, and the company is now aligned with similar pricing strategies [65][66] Question: Competitive landscape and aggregator partnerships - Management emphasized their first-mover advantage in online ordering and partnerships with aggregators, which have been pivotal in maintaining competitive positioning [85][86]