It's not too often you'll see company officials get excited about a 0.2% increase in domestic same-store sales. Yet that's exactly what's happening at Papa John's (NASDAQ:PZZA) after its rather minuscule gain in first-quarter domestic comps.
Have times really gotten that tough for the pizza maker? Well, not exactly. It's just that each of its major competitors, including Domino's (NYSE:DPZ) and Pizza Hut, which is owned by Yum! Brands (NYSE:YUM), posted negative domestic comps for the quarter. That makes Papa John's gain look downright extraordinary. The rest of its results weren't too shabby, either.
For the quarter, Papa John's earned $13.2 million, or $0.43 per share, down from the $16 million, or $0.47 per share, it earned in last year's first quarter. However, last year's results included a $3.4 million, or $0.10 per share, after-tax gain from BIBP Commodities, its franchisee-owned cheese purchasing company. Overall, revenues were up 7.5% to $260.6 million.
Although Papa John's continues to perform well in its home market, its international results just don't cut it. The company lost $2.3 million in the quarter, just as it did in the year-ago period. As the company continues to expand overseas, increased revenues are offset by rising costs associated with people and equipment. Papa John's is hoping to mimic the international success of Domino's, which continues to struggle domestically, yet recently completed a remarkable 53 consecutive quarters of international comps growth. Furthermore, Papa John's free cash flow fell by nearly 46%, largely as a result of its BIBP Commodities consolidation.
None of that scares Papa John's, however, and management certainly feels confident about its prospects. In the quarter, it repurchased 880,000 shares of stock at an average price of $29.05 (it trades at about $33 now). Also, the company increased its guidance for the year and now expects to earn $1.52 to $1.58 per share.
Should investors share that confidence? While I like the long-term potential of Papa John's, I'd like to see what its numbers look like without consolidations getting everything gooey. I'd also like to see if it can duplicate its domestic success in the international arena. If you haven't already claimed your share of the pie, I think it may be more prudent to wait for a better deal before placing an order.
For more on what's cooking with the pizza makers, check out:
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Fool contributor Mike Cianciolo welcomes feedback and doesn't own any of the companies in this article.
