By Tonya Garcia, MarketWatch
Papa John’s International Inc. says its pizzas and new Papadia flatbreads were flying out of its kitchens during the month of April, driving record sales for the month.
“April was the best month in the company’s history,” Papa John’s /zigman2/quotes/207343722/composite PZZA +3.10% Chief Executive Rob Lynch told MarketWatch after the company reported first-quarter earnings early Wednesday. Papa John’s has been around for about 35 years.
“Companies providing special services like delivery will persevere and do very well. Texas and Georgia are starting to reopen but we’re continuing to see customer demand for delivery at home.”
On the earnings call, Lynch said there was a business slowdown in March as large gatherings and sporting events, like the NCAA basketball tournament were canceled. Pantry-loading, in which customers stocked up at grocery stores rather than eating out, also took a toll on sales.
But by April, customers were looking outside the home for meals.
“With most of the country under shelter-in-place directives and dine-in restaurants closed, delivery and carryout food businesses became essential services,” Lynch said on the call, according to a FactSet transcript.
Transaction size jumped by a quarter among loyalty members and one million new and lapsed customers went to the Papa John’s digital site and, Lynch said, the company was quick to offer contactless delivery, a perk many customers appreciate in the midst of the coronavirus pandemic.
Papa John’s also had a new product to offer diners: the Papadias flatbread.
“At a $6 price point, they are quickly becoming a favorite with customers and delivering on our strategic objectives, including increased lunchtime transactions and higher tickets,” Lynch said on the call.
The company also introduced Jalapeño Popper Rolls, but plans to hold off on new menu items in order to focus on meeting the demands of the surge in business.
“We believe this strategy is prudent, as it allows operators to focus on generating existing sales, foregoes training employees for new products, as well as extends the runway for future comparable sales growth,” wrote Stifel analysts.
Stifel rates Papa John’s stock buy with a $95 price target, up from $80.
“The pizza segment has been better positioned than most throughout this crisis and Papa John’s performance is clear evidence of that fact as sales trends continue to accelerate,” wrote MKM Partners analysts.
“The focus is clearly on driving top-line and franchisee’s profitability, in these trying times, as there have been many behind-the-scenes moves we believe are contributing to the results, including the decision to re-invest half of the profit growth into its business (benefits, wages, restaurants, supply chain).”
MKM Partners rates Papa John’s stock neutral with a $72 price target, up from $70.
Papa John’s stock has rallied 12.6% over the past week, and is up nearly 36% over the last month, far surpassing the S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.05% , which has increased 4.8%.
“While we recognize some investors may balk at the valuation, we believe the brand is still in the early stages of a turnaround and has yet to benefit from menu innovation, expanded digital reach, accelerating unit development and eventual refranchising of company-owned units,” wrote BTIG analysts in a note.
“While we recognize the sales acceleration in April of 26.9% is attributable to stay-at-home orders and likely unsustainable, we expect the concept to maintain a significant portion of the gains once the environment normalizes.”
BTIG rates Papa John’s stock buy with an $85 price target.
With sales growing, Lynch told MarketWatch that the company is still hiring after bringing on more than 12,000 workers over the last six weeks.
“We can hire another 10,000 easily,” he said.