Papa John's International (PZZA) 8 Aug 24 2024 Q2 Earnings call transcript

In the second quarter of 2024, Papa John's reported a 4% decline in North American comparable sales, primarily driven by lower transactions. Despite these challenges, the company's management team remains confident and has outlined several initiatives to improve value perception, reignite innovation, and enhance the digital and loyalty experience.

Improving Value Perception

The company acknowledged the need to improve its value perception in the current economic climate, where consumers are focusing more on value. In response, Papa John's has begun shifting its marketing and investment efforts towards initiatives that showcase better value, such as the Cheese Burger Pizza and the 699 Papa Pairings. These efforts have already started to yield positive results, with an improvement in value perception over the past 8 weeks.

Innovation Pipeline

Papa John's is expanding its innovation pipeline to focus on unique and differentiated offers. The company has a strong foundation of consumer-tested innovations and is actively collaborating to identify new opportunities to enhance overall customer satisfaction and increase crave. These efforts are expected to contribute to stronger value perception and improved sales trends over time.

Digital and Loyalty Experience

Papa John's is placing a strong emphasis on improving conversion and reducing friction within the customer experience. The company is actively identifying opportunities to streamline the ordering journey and improve the overall user experience. This includes an app update that improves call-to-action and navigation, as well as a focus on evolving the holistic digital platform to improve conversion, drive repeat transactions, and streamline customer insights.

Marketing and Advertising

Papa John's has launched a new brand platform, "Better Getson," which is a modern refresh of brand visuals, tone, and message. This new platform is coupled with value messaging to best position the brand for conversion. The company is also investing in marketing messages and testing their impact on sales in the third quarter.

International Performance

In the international market, Papa John's is making significant progress in optimizing its U.K. business model. The company has closed underperforming company-owned restaurants and refranchised others, resulting in a profit-accretive second half of the year. The focus is now on driving higher AUVs and partnering with developing franchisees in key markets.

Future Outlook

Looking ahead, Papa John's anticipates North America comps to be down 3% to 5% for the full year 2024, with international comps expected to be down slightly. However, the company remains optimistic about the potential of its transformational initiatives and expects adjusted operating income to be between $135 million and $155 million for the year.

Investor and Analyst Questions

During the Q&A session, analysts questioned the company on its plans for domestic development, value perception initiatives, and international market performance. Papa John's executives provided detailed insights into their strategies for improving restaurant-level profitability, enhancing the digital experience, and driving growth in the international market.

In summary, Papa John's second-quarter earnings call highlighted the company's focus on improving value perception, reigniting innovation, and enhancing the digital and loyalty experience. Despite challenges in the North American market, management remains confident in the company's ability to drive sustainable, profitable growth over the long term.