Papa John’s ends tough year with weaker-than-expected Q4
Papa John’s closed a tough year on a weak note but said it expects new specialty pizzas, better marketing and a new investment partner to drive improvement in 2019.
The Louisville, Kentucky-based pizza chain said sales at established locations in North America dropped 8 percent in the fourth quarter compared to the same period a year ago. International same-store sales were down 3 percent.
But Papa John’s said Tuesday it’s confident it can stem those losses with new products like a chicken and waffle pizza coming later this year and ads targeting younger customers that emphasize its quality ingredients. It expects same-store sales will be down 1 to 5 percent in North America this year and flat to up 3 percent internationally.
“We have a lot of positivity and excitement around the way forward,” CEO Steve Ritchie said on a conference call with investors and analysts. “We do have a lot of work to do.”
Papa John’s is trying to turn things around after a difficult year that saw its founder, John Schnatter, resign as chairman after using a racial slur during a company conference call. Schnatter resigned as CEO in 2017 after he blamed weak pizza sales on the NFL player protests.
Earlier this month, activist investment firm Starboard Value invested $200 million in the chain and Papa John’s named Starboard CEO Jeff Smith as its chairman. Smith is known for his 2014 turnaround of the Olive Garden restaurant chain, and Ritchie called the investment “a strong vote of confidence” in Papa John’s.
Schnatter still holds one-third of the company’s shares and remains on Papa John’s board. But the addition of Smith and two other board members — including Ritchie — will dilute his influence.
Ritchie said company leaders went through a seven-hour diversity training workshop as part of an effort to change the company’s culture. He said Papa John’s also hopes repair the company’s image through charitable contributions. In January, it gave $500,000 to Bennett College, a historically black women’s college in North Carolina.
“It can’t be one thing. It has to be a cadence of multiple things,” he said.
Papa John’s lost $14 million, or 44 cents per share, in the fourth quarter. That was down from an 81-cent profit in the October-December period a year ago.
Excluding one-time items, the company earned 15 cents per share. That fell short of Wall Street’s forecast of 17 cents, according to analysts polled by FactSet.
Papa John’s said fourth-quarter revenue fell 20 percent to $374 million. That was also lower than analysts forecast.
Papa John’s said it expects full-year adjusted earnings in the range of $1.00 to $1.20 per share. That would be down from $1.34 in 2018.
Papa John’s shares were up $1.23, or almost 3 percent, at $43.02 in after-hours trading Tuesday.