Q2 2026 Papa John's International Inc Earnings Call Transcript
Key Points
- International business delivered 1.5% comparable sales growth, marking the seventh consecutive quarter of positive comps, with strong performance in the UK (up 10%) and Korea (up 9%).
- Papa Rewards loyalty program surpassed 42 million members, with loyalty customers outperforming non-loyalty customers by 12 percentage points in comparable sales and generating tickets 6% higher per order.
- Supply chain optimization is on track, capturing $7 million in Q2 benefits and $16 million year-to-date, with a target of at least $25 million in savings for 2026 and $60 million system-wide over the medium term.
- Early results from AI and digital investments are encouraging, with Lou AI-powered orders converting at an 18% higher rate and completing orders approximately 3 minutes faster than non-AI assisted orders.
- The company is making progress on portfolio optimization, having closed 101 of the planned 300 North American restaurants, with strong sales transfer to neighboring locations and a faster-than-expected closure pace.
- New product innovations, such as sandwiches and personal pizzas, are expanding the total addressable market, with sandwiches nearly fully offsetting the removal of Papadias.
- The company is investing $35 million in supplemental marketing and franchisee subsidies to accelerate transformation, including support for local co-ops, which are showing early outperformance of 200 basis points in supported markets.
- North America comparable sales declined 8.3% in Q2, driven by reduced order volume and lower customer acquisition, with the company revising its full-year outlook to a 6% to 8% decline.
- The company suspended its quarterly dividend to increase financial flexibility, signaling a shift in capital allocation priorities and potential shareholder return reduction.
- The transformation is taking longer than expected, with the company acknowledging that it must execute better and move faster to improve results.
- The QSR environment remains highly promotional, with competitors engaging in deep discounting, and Papa John's did not respond as strongly as needed, impacting sales.
- Innovation launches, such as pan pizza and Toy Story 5 activations, have not generated the expected level of new customer trial, with innovation alone failing to drive significant new customer acquisition.
- The company expects elevated investment of $35 million in 2026 and into 2027, which will pressure near-term profitability and EBITDA.
- Global system-wide sales are now expected to decline between 2% and 4% for 2026, reflecting continued softness in the consumer environment and competitive pressures.
- The company is facing challenges with franchisee profitability, particularly in the bottom quintile of operators, which shows a 400 basis point gap in comparable sales and restaurant margin performance versus the top quintile.
Good day and thank you for standing by. Welcome to the Papa John's second quarter 2026 conference call and webcast. (Operator Instructions) Please be advised that today's conference is being recorded. I would. Conference over to your speaker today, Heather Hollander, Senior Vice President, Investor Relations, SP&A and Strategy. Please go ahead.
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Good morning, and welcome to our second quarter 2026 earnings conference call. Earlier this morning, we issued our earnings release, which can be found on our Investor Relations website at ir.papajohns.com, under the News and Events tab, or by contacting our Investor Relations department. Joining me on the call this morning are Todd Penegor, President and Chief Executive Officer; and Chris Collins, Interim Chief Financial Officer and Senior Vice President, Corporate Finance and Principal.
Comments made during this call will include forward-looking statements within the
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