Papa John’s International, Inc. (PZZA) shares took a dip on Thursday after the company released its third-quarter earnings report. While the company reported adjusted earnings per share of 43 cents, meeting Wall Street expectations, revenues came in lower than anticipated. This performance reflects the ongoing challenges faced by the pizza giant in a difficult consumer environment.
Despite the lower revenues, Papa John’s CEO Todd Penegor emphasized the company’s commitment to navigating these tough times. He stated that the company delivered earnings in line with expectations, but attributed the revenue decline to several factors. International revenues from UK restaurants dropped by $9.9 million, while domestic restaurant sales decreased by $8.5 million due to lower transaction volumes. The sale of Preferred Marketing, the company’s former print and promotions company, also contributed to the decline, resulting in a $4.8 million loss.
Further examining the sales figures, North America comparable sales fell by 6% year-over-year, with domestic company-owned restaurants experiencing a 7% drop and North America franchised restaurants declining by 5%. International comparable sales also saw a 3% decrease compared to the previous year. This decline in sales resulted in a decrease in adjusted operating income to $29.3 million, a $4.3 million (or 12.9%) drop from the same period last year. Papa John’s attributed this decline to lower margins at Domestic Company-owned restaurants, a consequence of strategically reinvesting some of their first-half savings to enhance consumer value perception.
Despite the challenges, Papa John’s continues to expand its global presence. As of September 29, the company operates 5,908 restaurants across 49 countries and territories. On a positive note, the company announced a fourth-quarter dividend of 46 cents per common share, payable on November 29 to stockholders of record as of November 18. In addition, Papa John’s unveiled the appointment of Jenna Bromberg as their new Chief Marketing Officer, effective November 14. This move highlights the company’s commitment to strengthening its marketing efforts in order to attract customers and drive future growth.
While Papa John’s faces headwinds, the company’s focus on strategic investments and its commitment to delivering value to consumers suggest a potential for future recovery. Investors will be closely watching the company’s upcoming performance to see how it navigates these challenging economic conditions and delivers on its growth plans.
