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Inside Papa John’s Same-Store Sales Growth in 3Q17

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3Q17 performance

For 3Q17, Papa John’s (PZZA) reported a systemwide SSSG (same-store sales growth) of 1.0% in North America, compared with the analysts’ expectation of 1.4%. In North America, the company-owned restaurants reported SSSG of 1.7%, while franchised restaurants reported SSSG of 0.7%, and International markets’ SSSG stood at 5.3% for the quarter.

Papa John’s SSSG was negatively impacted by the temporary closing of restaurants due to natural disasters, competitive environments, and the decline in viewership of NFL (National Football League) games, for whom Papa John’s is the official pizza sponsor.

The company’s management stated that hurricanes lowered the company’s SSSG by less than 0.5%, but the implementation of digital advancements such as instant ordering through Facebook drove SSSG in North America.

International markets

In international markets, Papa John’s posted SSSG of 5.3%, with strong performances coming particularly from China and the UK. The optimization of its restaurant model, the enhancement of brand design, and the greater integration with third-party aggregators to broaden its accessibility channels all drove the company’s SSSG in China.

In the UK, SSSG was driven by marketing and promotional support for the launch of pan pizza and the company’s enhanced branding efforts.

Peer comparisons and outlook

For the same period, Domino’s Pizza (DPZ) reported SSSG of 8.4% in domestic restaurants and 5.1% in international restaurants. Pizza Hut, which operates under Yum! Brands (YUM), posted SSSG of 1%.

To improve its SSSG, Papa John’s management has been focusing on enhancing the customer experience, increasing efficiency through technology, and culture. The company has been working on product innovations and store redesign to enhance customers’ perception.

However, due to NFL’s National Anthem saga, the company’s management has lowered its 2017 SSSG guidance to 1.5% for North America, down from its earlier estimate of 2%–4%.

Next, we’ll look at Papa John’s unit growth.

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