Just when you think the market for pizza delivery restaurants is saturated, Papa John's Pizza (NASDAQ: PZZA) goes ahead and proves us all wrong. Just like Domino's Pizza (NYSE: DPZ) and YUM! Brands' (NYSE: YUM) Pizza Hut, the company continues to grow in a multitude of ways. Papa John's pizza is growing like a weed all over the world.
Papa John's reported third-quarter results on Nov. 5. Revenue popped 6.4% to $346.3 million. Net income climbed 10% to $14.3 million. Earnings-per-share jumped 18.2% to $0.65. Same-store-sales edged up 1.8% in North America, but rocketed up 8.1% internationally. It was the 12th straight month of positive same-store-sales growth for the company.
CEO John Schnatter stated that Papa John's is "resonating with customers around the world." In other words, it's primarily the food that's getting them in the door (or bringing the delivery people to their doors). Despite the fantastic 8.1% international same-store-sales growth, CFO John Schnatter stated, "The global operating competitive landscape remained challenging in the third quarter." He could have fooled us, those are fantastic results.
In the earnings release, the company also credited its success due to new store openings or acquisitions from the company and its franchisees as well as increased sales volumes at each specific store on average. Of the 90 new restaurants opened during the quarter, 40 of them were international. Year to date, Papa John's has increased its international presence by 9% compared to only 1.5% for North America.
In the development pipeline, Papa John's International is gearing up for an aggressive expansion overseas during the next six years. It plans to open 1,050 international locations, essentially doubling its current total. For North America, it's only targeting 250 more locations.
Delicious ingredients and store growth are not the only thing driving Papa John's to worldwide stardom. When pressed in the Q&A for more details as to what's driving sales growth, President Tony Thompson chimed in. He stated that digital sales are playing a role. He said management is seeing not only more order frequency from customers who use digital order, but they are also seeing larger ticket orders from those customers.
The company has now logged over $5 billion in cumulative digital sales. It considers itself "the acknowledged leader in digital ordering" and believes the use of digital ordering to be at a "pretty quick pivot point."
Pizza growth spreading like Domino's
Domino's Pizza concurs with the trends Papa John's is seeing. Last quarter, Domino's saw revenue climb 6.9%, international sales pop 13.9%, and same-store-sales jump 5%. It was its 79th straight quarter of international sales growth.
Like Papa John's, Domino's is enjoying success from its digital and mobile ordering platforms. Last quarter, 40% of its sales came from digital ordering. Mobile sales were up 102%. In its conference call, Domino's even named Papa John's three times, along with Pizza Hut, as the only ones receiving the vast majority of the digital ordering business. CEO J. Patrick Doyle explained that this is resulting in taking market share from regional and local pizza chains.
Pizza Hut was also mentioned several times in the Papa John's conference call on the topic of digital ordering. Though Yum! Brands CEO David Novak didn't go into details, he did mention "huge opportunity" and "opening new channels with digital" in the same breath. Pizza seems to be catching on internationally for Yum! Brands as well. For example, in China Pizza Hut saw a 6% same-store sales increase. This prompted Novak to state, "Our Pizza Hut business in China continues to deliver strong results."
Foolish final thoughts
There are three basic things to watch for with Papa John's. Look for continued same-store-sales improvement, further successful strides from digital ordering, and international new store growth. As long as Papa John's continues to deliver on all three, anyway you slice it, the company is a winner. Foolish investors may want to consider Papa John's now ahead of the next growth spurt.
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