To Papa John's credit, the company has been on the offensive this year, but positive same-store sales will likely not come until 2020.
— Danni Santana
Another quarter, another poor sales performance for Papa John’s — results that will come as no surprise to investors as the brand works to rebuild its brand reputation that was tarnished last year.
The pizza chain reported a system wide same-store sales decrease of 7 percent in the first quarter, marking the sixth consecutive quarter of losses for the company. Revenue also plummeted 12 percent to $398 million, it said Tuesday.
“North America results continue to be impacted by the consumer sentiment challenges experienced in the U.S. since last July,” CEO Steve Ritchie said on the company’s earnings call with analysts. “Lasting consumer sentiment change takes time, and we expect it will continue to be a headwind for our North American business in the second quarter.”
Papa John’s again excluded $16 million in “special charges” in its adjusted earnings, citing short term financial assistance given to franchisees, legal fees associated with Founder John Schnatter’s lawsuit over his dismissal from the company last year, and advisory costs that led to the $200 million investment by Starboard Value LP in February.
Long Road Back
Papa John’s has pulled no punches in its attempts to win back customers so far this year. Since the beginning of 2019, the pizza chain has hired a new chief marketing officer, revamped its loyalty program, and expanded third-party delivery with DoorDash. The moves have helped the company gradually lower losses in recent quarters.
At the executive level, Papa John’s has made six changes to its governing board, including the additions of NBA Hall of Famer Shaquille O’Neal, former OpenTable executive Jocelyn Mangan, and Starboard Value LP’s Jeffrey Smith as its new chairman to replace Schantter, which is reportedly looking to sell his remaining stake in Papa John’s, according to Reuters.
“Our partnership with Starboard is off to a great start,” said Ritchie, disclosing that the hedge fund has invested an additional $50 million in the company. “As we’ve previously said, we’ll carefully allocate this capital in addition to the original $200 million investment. To strengthen our balance sheet and make strategic investments to reinforce our brand market position, and drive long-term performance.”
Analyst firm BTIG predicts even more moves will be made by Papa John’s to appeal better to younger, more digitally savvy consumers, it said after meeting with the company in the March. Among them are more celebrity partnerships, including with prominent chefs, which Papa John’s hopes will change the sentiment around the company.