Nothing's worse than waiting for pizza to arrive, but that's pretty much what investors in delivery chain Papa John's
Business continues to look like a pie taken out of the oven too soon. While quarterly revenue was up, the company attributes most of that to the consolidation of 33 franchises. Sales volumes are down; same-store sales are off year to date at both company-owned and franchised stores. (It is worth noting, however, that the company closed more stores than it opened in the second quarter.)
The outlook for the rest of the year remains stable: The company is looking for a full-year "comps" increase of as much as 2% and bases some of its optimism on improved July results and recent marketing moves. EPS is seen between $2.20 and $2.28, though Papa John's is preparing investors for a performance on the low end of that range. Management has continued to buy back shares in anticipation of better days ahead.
I continue to believe in Papa John's long-term ability to get things going in the right direction again. It has a good brand, a good product, and a history of generating plenty of free cash flow. The company's shares are even starting to look interesting at about 14 times 2004 EPS estimates and with management pointing toward about 18% EPS growth.
But investors, it seems, are holding back for now. The company lost money in the first half, and that 18% is somewhat misleading: Projected store openings have been scaled back, closings ramped up, sales and restaurant margin estimates trimmed, and repurchases accelerated. (Kudos to management for a detailed and informative forward-looking press release.)
And that's not to mention the fact that investors now have another pure-play delivery choice in Dominos
Fool contributor Dave Marino-Nachison doesn't own shares of Papa John's or Domino's. He'd rather eat Armand's anyway.