Papa John's cuts guidance on soft US demand

(Sharecast News) - Pizza chain Papa John's International cut its full-year outlook on Thursday, after weak demand in the US hit third-quarter earnings. The Kentucky-based fast food group said total revenues edged up just 0.3% in the three months to September end, to $508.2m. Analysts had been looking for revenues closer to $523.2m.

International comparable sales rose 7%. However, in North America, they slid 3%, hit by weak consumer sentiment and stiff competition across the quick-service restaurant sector.

Adjusted diluted earnings fell to $0.32 a share from $0.43, missing consensus for $0.41.

As a result, Papa John's cut its full-year outlook.

It now expects system-wide sales - which includes sales from both company and franchisee-owned outlets - to grow by between 1% and 2%, down from previous guidance for between 2% and 5%.

The forecast for North America comparable sales was cut to between -2% and -2.5%, while adjusted earnings before interest, tax, depreciation and amortisation are now expected to come in between $190m and $200m.

Prior guidance had been for between $200m and $220m.

Todd Penegor, chief executive, said: "We are sharpening our value proposition and rebuilding our innovation pipeline to add new sales layers to our business.

"As we execute our transformation strategy, we are also strengthening our competitiveness in strategic markets. Concurrently, we are taking action to remove non-customer facing costs and build a more nimble, efficient organisation.

"Papa John's is a strong brand with a healthy balance sheet, and I'm confident that the work underway will position us to drive sustainable, profitable growth."

Earlier in the week, shares in Papa John's tumbled after it was reported that private equity firm Apollo Global had withdrawn an $2.1bn offer to take the chain private.

Papa John's did not address the takeover speculation on Thursday. However, Penegor acknowledged on a call with investors that if an alternative to the firm's current strategy emerged, the board would "fully consider it".