Papa John's (NASDAQ:PZZA) Reports Sales Below Analyst Estimates In Q4 Earnings
Fast-food pizza chain Papa John’s (NASDAQ:PZZA) fell short of analysts' expectations in Q4 FY2023, with revenue up 8.6% year on year to $571.3 million. It made a non-GAAP profit of $0.91 per share, improving from its profit of $0.71 per share in the same quarter last year.
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Papa John's (PZZA) Q4 FY2023 Highlights:
Revenue: $571.3 million vs analyst estimates of $578.2 million (1.2% miss)
EPS (non-GAAP): $0.91 vs analyst estimates of $0.72 (26.6% beat)
Free Cash Flow of $40.4 million, up 137% from the previous quarter
Gross Margin (GAAP): 30.4%, up from 29.9% in the same quarter last year
Same-Store Sales were up 0.1% year on year
Store Locations: 5,906 at quarter end, increasing by 200 over the last 12 months
Market Capitalization: $2.30 billion
“Papa Johns finished 2023 with a solid fourth quarter and achieved record system-wide sales for the year, marking this as our fourth consecutive year of positive North America comparable restaurant sales,” said Rob Lynch, Papa Johns President and CEO.
Founded by the eclectic John “Papa John” Schnatter, Papa John’s (NASDAQ:PZZA) is a globally recognized pizza delivery and carryout chain known for “better ingredients” and “better pizza”.
Traditional Fast Food
Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.
Sales Growth
Papa John's is larger than most restaurant chains and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's annualized revenue growth rate of 7.2% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was decent as it opened new restaurants and expanded its reach.
This quarter, Papa John's revenue grew 8.6% year on year to $571.3 million, missing Wall Street's expectations. Looking ahead, Wall Street expects sales to grow 3.8% over the next 12 months, a deceleration from this quarter.
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Same-Store Sales
Same-store sales growth is an important metric that tracks organic growth and demand for a restaurant's established locations.
Papa John's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 0.4% year on year. This performance isn't ideal and the company should reconsider its growth strategy before opening new restaurants with its precious capital.
In the latest quarter, Papa John's year on year same-store sales were flat. This performance was more or less in line with the same quarter last year.
Key Takeaways from Papa John's Q4 Results
We were impressed by how Papa John's beat analysts' gross margin expectations this quarter. We were also excited its EPS outperformed Wall Street's estimates. On the other hand, its revenue unfortunately missed analysts' expectations. No guidance was given in the earnings release. Overall, we think this was a really good quarter that should please shareholders. The stock is flat after reporting and currently trades at $69.8 per share.
So should you invest in Papa John's right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
