Papa Murphy’s signaled Wednesday the take-and-bake pizza chain may be for sale.
The Vancouver-based company said it hired a San Francisco merger-and-acquisition firm, North Point Advisors, to help conduct “a comprehensive review of its business strategy.”
“Papa Murphy’s announced that it is conducting a process to explore and evaluate strategic alternatives to maximize shareholder value and position the Company for long-term success,” a news release says. “Papa Murphy’s remains open to all strategic options that would enhance shareholder value for the long-term.
“Financial and strategic alternatives may include, but are not limited to, a possible sale of the business. There is no specific timetable for identifying potential transactions or transaction candidates and there is no assurance that any transaction will be completed. The Company does not intend to make any further comment regarding such process unless its Board of Directors has approved a specific course of action.”
A Papa Murphy’s spokesperson declined to elaborate on the original statement, other than to stress that a sale is only one option under consideration and that there is no timetable for a decision on any of the strategies under review. A North Point Advisors representative did not return a voicemail by The Columbian’s print deadline.
The revelation that it was evaluating “strategic alternatives” with the assistance of a merger-and-acquisition specialist was contained in the company’s third-quarter earnings report.
In a conference call with investors Wednesday about that report, CEO Weldon Spangler read the company’s statement about the sale possibility but did not elaborate. Investors did not ask any questions about the announcement during the Q&A portion of the call.
“We are still in the early stages of this review and do not intend to make any further public comment until it’s completed,” Spangler said.
The company reported a net loss of 4 cents per share and a 2.1 percent decrease in store sales compared to the third quarter of 2017.
Revenue for the quarter was $28.8 million, compared to $33.7 million in the third quarter of 2017, “primarily due to the refranchising of 29 and closure of six Company-owned stores since October 2, 2017,” the company said.
Revenue was slightly above the average prediction from analysts of $26.84 million, as reported by Yahoo Finance, although analysts had also predicted a 1 cent net revenue per share.
During the conference call with investment analysts, Spangler and CFO Nik Rupp focused on the company’s financial performance and its efforts to overhaul its brand and revive sales, particularly by working to make Papa Murphy’s more convenient for customers.
Those efforts include an online platform introduced in March and a Papa Murphy’s app for mobile orders that debuted in September. The app has been downloaded 84,000 times so far, Spangler said, and online orders increased during the quarter.
The company is also expanding the availability of home delivery though partnerships with third-party courier services like Postmates, with service expected to be available in 450 stores by the end of the year. Delivery orders are still a minority of the company’s transactions, Spangler said, but they’ve grown by 67 percent since the last quarter.
“Our customers have told us time and time again that conveniences plays an integral role in their decision-making process for what to have for dinner,” he said.
Spangler discussed a few other strategies that the company is pursuing, including an increased focus on digital marketing and appealing to younger customers, an extension of the company’s credit to August 2020 and efforts to develop stronger relationships with its franchise store owners.
On the financial front, Rupp attributed the negative sales results in part to a continuing decrease in the overall number of Papa Murphy’s stores. However, Spangler noted that sales trends have been improving in recent months and have continued to do so in the first five weeks of the fourth quarter.
“While the third quarter same-store sales percentage is still negative, the third quarter result represents our best percentage change in same-store sales in 12 quarters,” he said.
In response to a question from investor Andy Barish of the Jefferies firm, Spangler said that online ordering is increasing and tends to result in larger average order sizes, but the company is maintaining a conservative outlook for sales growth in the fourth quarter due to several anticipated operating cost increases in November and December.
The company’s stock, which trades on the Nasdaq as FRSH, closed trading at $4.45 on Wednesday, down 5.92 percent, but rose by $0.75 in after-hours trading.
