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Papa John’s hits 'grand slam' with partnership

Chain’s same-store sales rise 4.8 percent in the second quarter

Professional sports have been good to Papa John’s International Inc.

The Louisville-based pizza chain this week said its second quarter same-store sales rose 4.8 percent, in part thanks to its “Papa Slam” promotion with major league baseball — where customers can get 40 percent off a pizza ordered online the day after a baseball player hits a grand slam.

That deal gave the chain a summer promotion that encouraged online ordering to go along with the company’s deal with the National Football League. The company said on its earnings call Wednesday that it recently signed a new multi-year sponsorship deal with the NFL.

“We’re very pleased with our Papa Slam promotion,” Company president Steve Ritchie said on the company’s earnings call. He said the deal was “effectively communicated.”

The chain’s sales performance for the quarter ended June 26 was strong enough to cause the company to raise its sales and earnings guidance for the year.

Papa John’s expects full-year earnings per share to be $2.35 to $2.45, up from $2.30 to $2.40 that the company previously expected, while same-store sales should rise in the 3 percent to 5 percent range, up from 2 to 4 percent.

Investors cheered the news. Papa John’s stock rose 5 percent by early afternoon trading.

Revenues in the quarter rose 6 percent to $423 million, from $399 million. Net income more than doubled to $22.5 million from $10.8 million — though Papa John’s noted that net income rose 20.1 percent when legal expenses paid in 2015 were factored out.

Same-store sales at the chain have increased for 23 straight quarters. And Ritchie said on the earnings call that the company thinks the momentum will continue through the second half of the year.

Papa John’s and other major pizza chains have all managed to generate positive same-store sales and traffic, despite a weakening overall restaurant industry. One of the reasons, executives believe, is the use of technology.

Papa John’s says that more than 55 percent of orders at the chain now come through digital channels, and the company expects that number to grow to 60 percent quickly.

“We have seen the overall category shift,” Ritchie said. “More share is moving to national players, we’re one of them, from independents. A number of factors have played into that. Digital growth for one.

“That’s an emergence that has enabled some share steal with independents.”

Company executives also believe that their focus on quality has enabled the chain to command a more premium price when compared with other chains — which has enabled the consistent growth in recent years.

Papa John’s has picked those efforts up more recently, removing preservatives, artificial flavors and high fructose corn syrup from pizzas. The chain also moved to sourcing chicken raised without antibiotics. 

John Schnatter, the chain’s founder and CEO, said on the call that these efforts should pave the way for strong performance in future years.

“We had a great quarter because of what we did the last two, three, four years,” Schnatter said. “In three years we will have another great quarter because of what we’re doing this year.”

Papa John’s will continue its partnerships with sports brands, and has branched out into the big screen recently with its marketing deal with the Ghostbusters movie. And though he has retired, former Denver Broncos and Indianapolis Colts quarterback Peyton Manning — a joint venture partner of Papa John’s in Denver — will continue to appear in the chain’s ads.

“We will never replace Peyton Manning,” Schnatter said. “He is not replaceable. There is no idea or desire to ever replace Peyton Manning. Peyton Manning is the Michael Jordan of football. End of conversation.”

Contact Jonathan Maze at [email protected]
Follow him on Twitter at @jonathanmaze

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