Papa John’s Earnings Call: Growth and Challenges

Papa John’s International ((PZZA)) has held its Q2 earnings call. Read on for the main highlights of the call.

Papa John’s International recently held its earnings call, revealing a generally positive sentiment with notable achievements in North America and international markets. The company showcased successful product innovations and strategic investments in technology and customer engagement, despite facing challenges such as rising operating costs and market optimization efforts in China. Overall, the positive developments slightly outweighed the negatives.

Positive North America Comparable Sales

Papa John’s reported a return to positive comparable sales in North America, ending the quarter with a 1% increase. This growth was supported by a 1% rise in transaction comps, which improved by 220 basis points sequentially, signaling a strong recovery in the region.

International Comparable Sales Growth

Internationally, the company experienced a 4% increase in comparable sales during Q2, prompting an optimistic revision of its international sales growth outlook to 2% to 4% for 2025. This growth underscores the company’s successful expansion efforts beyond North America.

Innovation and Product Launches

The introduction of new menu items, such as the Cheddar Crust and Shaq-a-Roni, has been well-received, increasing the average number of pizzas per order by 6%. Additionally, the launch of Croissant Pizza in Dubai, with plans for further market expansion, highlights Papa John’s commitment to innovation.

Technology and Customer Experience Improvements

Papa John’s partnership with Google Cloud to enhance its technology infrastructure has resulted in increased app conversion rates and improved CRM engagement. The expansion of the loyalty program, which added 2.7 million new members since November 2024, further enhances customer experience and engagement.

Supply Chain Optimization

The company identified $50 million in potential cost savings within its North American supply chain, with 40% of these savings expected to be realized by 2026. This optimization effort is part of a broader strategy to improve operational efficiency.

Slight Decline in Ticket Comps

Despite overall positive sales trends, Papa John’s experienced a slight decline in ticket comps by less than 0.5 percentage point, attributed to changes in the loyalty program and a shift in product mix.

Decline in Company-Owned Restaurant Revenues

Revenues from company-owned restaurants decreased by $6 million due to refranchising and market optimization efforts, reflecting a strategic shift in the company’s operational focus.

Higher Operating Costs

The company faced increased operating costs due to labor inflation, aggregator fees, advertising, and food costs, resulting in a decline in EBITDA margins for the company-owned restaurant segment by approximately 220 basis points.

Challenges in China

As part of its market optimization strategy, Papa John’s closed 41 underperforming restaurants in China during Q2, highlighting the challenges faced in this key market.

Forward-Looking Guidance

CEO Todd Penegor outlined the company’s strategic priorities and future growth expectations during the earnings call. Papa John’s aims to achieve a 2% to 5% increase in system-wide sales for 2025, with North America comparable sales expected to remain flat to 2% growth. The company also enhanced its international sales growth guidance to 2% to 4%. Significant marketing investments and supply chain cost savings are anticipated to support these goals.

In conclusion, Papa John’s earnings call reflected a cautiously optimistic outlook, with positive sales trends in North America and international markets, bolstered by product innovation and strategic investments. While challenges such as rising costs and market optimization efforts persist, the company’s forward-looking guidance suggests a focus on sustainable growth and operational efficiency.