The cook-at-home pizza chain saw domestic systemwide comparable-store sales decrease 7.8% for the quarter and 5.2% for the fiscal year, according to a company estimate. That led CEO Ken Calwell to resign last week, but his interim replacement, CFO Jean Birch, seems confident about the future.
"While we are disappointed that our fourth-quarter sales remained under pressure, we continue to execute against long-term strategic initiatives, such as the launch of our online ordering platform, the refranchising of company stores, and our first ever national ad campaign which debuts in the first quarter of 2017," said Birch. "While the environment remains competitive, we believe these initiatives, along with our return to traditional marketing messaging and a focus on new product innovation will drive positive results in the future."
The numbers aren't all bad
While the results were not good, the company did open 104 new stores in the year, up from 99 in 2015. It also manged to slightly trim its debt from $111.6 million at the end of Q3 to $106.8 million at the end of the year.
The most troubling aspect of these results may simply be that they compare very poorly to Domino's and Papa John's. When a company's two closest rivals post year-over-year same-store sales gains and your brand loses sales, it suggests there is something wrong with either your execution or your business model -- or both.
Maybe it's about convenience?
Domino's and Papa John's differ from Papa Murphy's in one major way: The two successful chains deliver ready-to-eat food at a low price while Papa Murphy's offers pizzas that have to be finished at the customer's home. It's easy to see the appeal of having a pizza come piping-hot out of your own oven, but it's also easy to see why that concept would not always be convenient.
It's possible that the market for people who want to both order pizzas and cook the pies themselves does not have the growth potential of the market for ready-to-eat pickup or delivery.
Compared to its rivals Papa Murphy's offers an experience consumers are likely to use less often. Because of that, the company will have to find innovative ways to increase customer traffic, which may be a challenge given its basic setup.
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Daniel Kline has no position in any stocks mentioned.