Toronto, Ontario, April 15, 2020 – Pizza Pizza Royalty Corp. (the “Company”) (TSX: PZA) today provided an update on the business impact of the coronavirus (COVID-19) pandemic on Pizza Pizza Limited’s restaurant operations and the impact on its monthly dividend policy.
Pizza Pizza and Pizza 73 System Sales have been negatively impacted as its restaurant operators have taken significant measures in their restaurants to protect the health of employees and guests in compliance with social-distancing recommendations and requirements of applicable health authorities, including the closure of restaurant seating areas.
Pizza Pizza and Pizza 73 operate traditional and non-traditional restaurants. By brand, Pizza Pizza traditional restaurant sales have historically consisted of approximately 60% delivery sales and 40% walk-in sales, whereas Pizza 73 traditional restaurants have been approximately 90% delivery sales and 10% walk-in sales. As a result of government-mandated social distancing policies, the majority of walk-in sales at both brands has disappeared. Similarly, with the exception of a few locations, non-traditional Pizza Pizza and Pizza 73 restaurants have closed, causing those sales to decrease to near zero. These non-traditional locations, which account for nearly 10% of System Sales, offer a limited menu and operate, for example, in sporting arenas, outdoor entertainment venues, universities, hospitals, and cinemas.
With the decrease in System Sales, the Company’s royalty income has also decreased and, as a result, the Company has announced its monthly dividend will be reduced from $0.0713 per share to $0.05 per share beginning with the April 2020 dividend. The dividend will be payable to shareholders of record at the close of business on April 30, 2020, and will be paid on May 15, 2020. For tax purposes, the 2020 dividend will be considered a taxable eligible dividend.
Jay Swartz, the Company’s chair, said, “Without clear visibility as to how, and for how long, COVID-19 will negatively impact System Sales, the Board decided to reduce the dividend at this time. We recognize that certain segments of System Sales have significantly decreased, but the royalty income generated from delivery sales, backstopped by the Company’s cash reserve, provides the ability to continue the majority of the shareholder dividend during these unprecedented times,”
The Company will continue to monitor System Sales and royalty income, and will consider further changes to the monthly dividend taking into account the duration and impacts of the COVID-19 pandemic on restaurant operations, and the timing and pace of economic recovery in the markets that Pizza Pizza and Pizza 73 serve.
Paul Goddard, CEO, Pizza Pizza Limited, said, “Fortunately for Pizza Pizza and Pizza 73, our delivery business remains stable and we are actively taking measures with our marketing, operations and technology teams to drive increased delivery business. Our team was able to offer contactless delivery very quickly and then, shortly thereafter, introduced our innovative, tamper-proof pizza box. Customers also now have the option to order, pay and even tip their driver online through our website or various apps. This offers our customers the added peace of mind that our pizzas leave our 500 degree ovens and are placed immediately into a secure box which will be delivered as per the customer’s instructions without any direct human contact. Pizza Pizza Limited is also working closely with its franchisees, partners, suppliers and landlords to support the ongoing operation of our traditional locations through these unprecedented market conditions, staying true to our mission of making sure every order is a memorable one, worth repeating. I want to personally thank our employees, restaurant employees, restaurant operators and delivery drivers, and especially all health care workers who are putting others first daily.”
The Company typically only provides a business update during the normal quarterly reporting. Given these are not normal times, as Canadians continue to navigate this public health crisis, the Company is providing the following period-level detail which indicates how Pizza Pizza and Pizza 73 restaurant sales trended during the quarter. The Company notes that the situation remains fluid and it is continuing to assess the impact COVID-19 has had and will have on restaurant sales.
SALES
Royalty Pool System sales for the quarter ended March 31, 2020, decreased 6.1% to $125.8 million from $133.9 million in the same quarter last year. By brand, sales from the 645 Pizza Pizza restaurants in the Royalty Pool decreased 5.3% to $105.2 million for the quarter compared to $111.0 million in the same quarter last year. Sales from the 104 Pizza 73 restaurants decreased 10.1% to $20.6 million for the quarter compared to $22.9 million in the same quarter last year.
SSSG, the key driver of yield growth for shareholders of the Company, decreased -6.6% for the quarter compared -1.5% in the same quarter last year. The March results shown in the following table are directly related to the adverse effect of the coronavirus pandemic.
|
SSSG |
Monthly – 2020 (%) |
First Quarter (%) |
|||
|
January |
February |
March |
2020 |
2019 |
|
|
Pizza Pizza |
3.1 |
0.2 |
-18.4 |
-6.3 |
-2.4 |
|
Pizza 73 |
-1.4 |
-8.0 |
-13.7 |
-8.3 |
2.9 |
|
Combined |
2.3 |
-1.2 |
-17.6 |
-6.6 |
-1.5 |
The Company also announced that its March 31, 2020 financial statements will be issued after the market closes on Wednesday, May 13, 2020. Details of a conference call will follow in a subsequent press release.
For further information
Curt Feltner, Chief Financial Officer, Pizza Pizza Limited
(416) 967-1010 x307
cfeltner@pizzapizza.ca
phx2uat.pizzapizza.ca and www.pizza73.com or www.sedar.com.
Christine D’Sylva, Vice President, Finance & Investor Relations, Pizza Pizza Limited
(416) 967-1010 x393
cdsylva@pizzapizza.ca
phx2uat.pizzapizza.ca and www.pizza73.com or www.sedar.com.
