Papa Murphy’s Holdings Inc. is tailoring its messaging around value and convenience as it works to turn around the take-and-bake pizza brand, executives said Wednesday.
The Vancouver, Wash.-based company in the second quarter ended July 2 completed its first full reporting period on a new e-commerce platform, Olo, and it was performing well, said Weldon Spangler, the brand’s CEO, in an earnings call.
“Our efforts are focused around ensuring we engage customers with relevant offers that are compelling and provide the right value, while also looking to protect franchise owner profitability,” Spangler said.
For the second quarter, Papa Murphy’s swung to a profit of $1.4 million, or 8 cents a share, from a loss of $6.1 million, or 36 cents a share, in the same period last year. Revenues declined 14.7 percent to $30.8 million from $36.1 million in the prior-year quarter.
Same-store sales declined 2.4 percent in the quarter, including a 2.2 percent decrease at franchisee-owned stores and a 4.6 percent decrease at company-owned stores.
“Although we did not see positive system-wide comparable store sales in the quarter,” Spangler said, “we continue to see many examples where markets are turning the corner as they embrace and fully execute against these marketing initiatives”
Spangler said Papa Murphy’s value initiatives such as $10 Tuesday and special offers on Fridays — when accompanied by promotions at the store level —“are performing very well.”
Andy Barish, an analyst with Jefferies, said in a note Thursday that the value initiatives were helping the brand turn the corner on sales, “but work remains” as the company’s management urges franchisee adoption of the promotions.
Barish, who maintained a “hold” recommendation on Papa Murphy’s stock, said the company is “embarking on the right initiatives,” such as digital marketing, a value strategy, digital and off-premise sales and cost management, but there is “limited visibility on whether these actions can materially move the needle and when.”
Spangler said the online-order mix continued to increase in the quarter and the company was seeing average checks about 20 percent higher for those online orders.
With the Olo platform, he added, Papa Murphy’s can emphasize the convenience of delivery and curbside pick-up.
“More than a quarter of all of our stores now provide delivery as an option through at least one but sometimes multiple delivery partners,” Spangler said. “We believe delivery orders remain highly incremental with attractive and profitable check averages. We will continue driving the expansion of our delivery footprint and are on track to offer delivery in about half of our stores by year end.”
Spangler said the company was continuing with its refranchising efforts, ending the quarter with 122 company-owned stores, down 23 units from the last quarter.
“During the quarter, we concluded the refranchising of 22 company-owned stores, 20 in Colorado and two in Arkansas and are in active discussions with existing franchise owners to refranchise additional company-owned stores,” he said.
Spangler said the company is committed to a 95-percent franchise system with no more than 50 company-owned stores by 2020.
Papa Murphy’s, founded in 1981, has 1,500 locations in 37 states, Canada and the United Arab Emirates.
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