Papa John’s Earnings Call: Mixed Sentiment and Strategic Moves

Papa John’s International ((PZZA)) has held its Q3 earnings call. Read on for the main highlights of the call.

The latest earnings call from Papa John’s International painted a mixed picture, highlighting strong international performance and strategic innovations, while also addressing challenges in North American sales and increased promotional activities. The company is actively focusing on cost-saving measures and refranchising efforts to bolster its financial standing.

International Sales Growth

Papa John’s international segment showcased impressive results with a 7% comparable sales growth in the third quarter. This growth was driven by robust performance across key markets in Europe, the Middle East, and Asia Pacific, underscoring the company’s successful international strategies.

Supply Chain Savings

Efforts to optimize the North American supply chain are expected to yield significant savings, with projections of at least $50 million by 2028. The company plans to achieve $20 million of these savings by 2026, reflecting a strategic focus on operational efficiency.

Innovation Pipeline

Papa John’s has revitalized its innovation framework, launching new products like Papa Dippa and Grand Papa. The company plans to introduce reimagined sides in 2026 to drive sales and expand margins, demonstrating a commitment to product innovation.

Loyalty Program Growth

The loyalty program has reached a milestone of 40 million total accounts, adding nearly 1 million new members in the last three months. This growth indicates strong customer engagement and loyalty to the brand.

Digital Platform Enhancement

The launch of a modernized first-party digital ordering platform across mobile apps is driving higher conversion rates and improving the customer experience, highlighting the company’s focus on digital transformation.

North America Sales Decline

North American comparable sales saw a decline of 2.7% in the third quarter, primarily due to decreased sales in products outside the core pizza offering, posing a challenge for the company.

Flat Global Comparable Sales

Global comparable sales remained flat for the third quarter, with challenges stemming from consumer sentiment and a more promotional QSR marketplace, reflecting broader market trends.

Increased Promotional Activity

To counteract declining order trends from small ticket web customers, the company intensified its promotional activities, including a 50% off carryout offer, aiming to boost sales.

Higher G&A Expenses

Consolidated adjusted EBITDA was impacted by incremental marketing investments and higher general and administrative expenses, including $2 million in increased incentive compensation.

Side Items Revenue Decline

The majority of the sales pressure in North America was attributed to declines in side items such as wings, bread sides, Papadias, and Papa Bites, indicating a need for strategic adjustments in this area.

Forward-Looking Guidance

Papa John’s provided forward-looking guidance that includes plans to achieve $50 million in supply chain savings by 2028, with $20 million expected by 2026. The company also aims to capture at least $25 million in G&A savings across 2026 and 2027. The refranchising program is set to accelerate, reducing company-owned restaurants to a mid-single-digit percentage of the North American system. These strategic initiatives are designed to position Papa John’s for sustainable, profitable growth amid current market challenges.

In summary, the earnings call from Papa John’s International highlighted a mixed sentiment, with strong international growth and strategic innovations being offset by challenges in North American sales and increased promotional activities. The company’s focus on cost-saving measures, refranchising, and product innovation aims to strengthen its financial position and drive future growth.