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What Drove Papa John’s Revenue in 3Q17?

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3Q17 revenue

For 3Q17, Papa John’s (PZZA) reported revenues of $431.7 million, which is 0.9% higher than the analysts’ estimate of $427.7 million. Compared with 3Q16, the company’s revenue has risen 2.2% YoY (year-over-year).

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Business segments

Papa John’s four revenue sources are as follows:

  • domestic company-owned restaurant sales
  • North America commissary sales
  • royalties and fees collected from domestic franchisees
  • international operations

Domestic company-owned restaurants

In 3Q17, the segment posted revenues of $196.3 million, which represents a 1.4% fall from $199.0 million in 3Q17 due to the refranchising of company-owned restaurants. In 3Q17, the company operated 31 fewer company-owned restaurants than in 3Q16. But some of these declines were offset by positive SSSG (same-store sales growth) of 1.7%.

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North America commissary

This segment posted revenues of $178.1 million, which represents 4.9% growth over its $169.7 million in 3Q16, driven by increased sales volumes due to the addition of new restaurants and positive SSSG.

Domestic franchised-restaurants

This segment generated revenues of $25.6 million, which represents 3.2% growth, compared with $24.8 million in 3Q16. This revenue growth was driven by an increase in the unit count of franchised restaurants by 61 units and positive SSSG of 0.7%.

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International operations

In 3Q17, this segment’s revenues rose 9.9% YoY to $31.8 million. This revenue growth was driven by the addition of 105 franchised restaurants and positive SSSG growth of 5.3% YoY. But some of the revenue growth was offset by a decline of five company-owned restaurants compared with 3Q16.

Peer comparisons and outlook

For the same period, Domino’s Pizza (DPZ) reported revenue growth of 13.6% YoY, while Yum! Brands (YUM) reported a 5.4% fall.

For the next four quarters, analysts are expecting Papa John’s to post revenues of $1.84 billion, which represents 5.1% YoY growth over $1.76 billion in 3Q16. This growth is expected to be driven by the addition of new restaurants and positive SSSG.

Next, we’ll take a closer look at Papa John’s 3Q17 SSSG.

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