Restaurant executives cautious on consumer, economy

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Papa John’s Pizza

After what chief executive John Schnatter called an “outstanding” second quarter, Papa John’s raised its full-year, earnings-per-share guidance to between $2.45 and $2.55, from a previous range of $2.40 to $2.50 per share. The company also raised its expectations for same-store sales growth in both its domestic and international systems.

Second-quarter net income increased 22 percent, while revenue rose 8.5 percent, reflecting same-store sales growth of 5.7 percent in North America and 6.1 percent in Papa John’s international system. Officials did not credit any new initiatives with driving results, but rather the brands consistent deployment of the “Papa John’s Way,” built around in-store execution and quality-focused marketing.

In a call with analysts, Andrew Varga, chief marketing officer for Papa John's Pizza, said:

“We’ve really seen broadly in QSR over the past, let’s say, four to five periods, some pretty good strength across all categories. In one sense, the reports we’re seeing give us some encouragement, at least in our specific and broader category of QSR from the same-store sales perspective, that things look good.

"We feel very good that we’re in a unique position to take some share from larger quick-service chains and from the largest piece of the pizza category, which is the independents. We’re not doing anything differently than what we’ve told you over the last few years. We just keep running our quality positioning and quality story and keep doing it every day.”

Starbucks Coffee

The coffeehouse giant lowered its earnings forecast for its fiscal fourth quarter after the July 1-ended third quarter produced results below its expectations. Net income rose 19 percent for Starbucks while revenue grew 13 percent, reflecting a 6-percent global same-store sales increase, including a 7-percent gain in the United States. However, sales began slipping in mid-June and continued their swoon into July.

Like Chipotle, Starbucks endured a steep drop in its share price after reporting disappointing earnings, as the stock fell more than 10 percent.

In a call with analysts, Howard Schultz, Starbucks' chief executive, said:

“We had 7-percent U.S. comp growth and 6-percent global comp growth for the [second] quarter. We would take that any quarter over the 41-year history of the company, and it’s a stunning accomplishment, given the backdrop of economic issues.

"We saw a moderate change in June, but the numbers that Starbucks now has are so big that a moderate change in transactions and comps can have a swift and acute change to the economics of the current quarter. …

"So this is not a Starbucks issue; this is a macro problem. It’s not an excuse — we have to correct code on it — but we’ve got a fracture in consumer confidence, and one of the things that you already know about, but we’re confident that we will be able to navigate through it."

Contact Mark Brandau at mark.brandau@penton.com
Follow him on Twitter: @Mark_from_NRN