Monday, take-out and delivery pizza restaurant chain Papa John's International Inc. (PZZA) reaffirmed its 2009 earnings outlook, while providing its guidance for the full year 2010.
The Louisville, Kentucky-based pizza maker projected 2010 earnings to be in the range of $1.70 to $1.90 per share that excludes the impact of BIBP Commodities Inc. or BIBP, the franchisee-owned cheese purchasing company, but includes potential volatility in the average spot cheese price for the year. Wall Street analysts currently expect the company to earn $1.74 per share for the year.
The projected earnings guidance range also includes the accretive impact of the expected execution of a share repurchase authorization throughout 2010.
Papa John after November 3, repurchased approximately 1.0 million shares of its stock at an average price of $22.52 per share or a total of $23.5 million and has $34 million remaining available for the repurchase of common stock under the authorization.
Excluding the unfavorable impact on revenues of the deconsolidation of the franchise restaurants, the company expects consolidated revenues to rise approximately 3% to 5% in 2010, compared to 2009, due to worldwide unit growth, increases in the royalty rate and anticipated increase in commodity cost resulting in higher commissary sales prices. Analysts currently expect revenue of 1.13 billion for 2010.
Worldwide net unit growth in 2010 is expected to be in the range of 140 to 180 units, including an increase of 40 to 60 units domestically, which will lead to domestic system-wide comparable sales to range from an increase of 1% to a decrease of 1% in 2010, with results for company-owned and franchised units expected to be relatively consistent.
Worldwide net unit growth will increase 100 to 120 units internationally and total sales growth for international restaurants is expected to range from 15% to 20% in 2010,primarily due to new unit growth.
Consolidated operating margin is expected to be approximately 1.0% higher than 2009 results, primarily due to the increase in the domestic royalty rate from 4.25% to 4.50% in September 2009 and the additional increase to 4.75% planned for January 2010. The increase is also attributable to a reduction in the anticipated levels of discretionary marketing support for the domestic franchise system in 2010 and the full-year impact in 2010 from September 2009 reduction in corporate support staff.
The company said its international operations are expected to report an increased operating loss primarily due to start-up costs associated with company-owned commissary in the United Kingdom during 2010 and it anticipates international business unit to achieve break-even results in 2012.
Capital expenditures is expected to be approximately $40 to $45 million with primary emphasis on certain technology-based initiatives focused on enhancing online ordering platform and improving productivity in company-owned restaurants and commissaries,and the completion of its commissary in the United Kingdom.
Papa John reaffirmed its earnings guidance for 2009 to be in the range of $1.42 to $1.46 per share from its prior range of $1.38 - $1.44, excluding the impact of BIBP.Analysts expect earnings of $1.47 per share for the year.
PZZA closed Monday's regular trading at $21.65, down $0.09 or 0.41%, on a volume of 0.16 million shares on the Nasdaq. However,in after hours, the stock gained $0.09 or 0.42%, trading at $21.74.
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