Papa John's cites 'challenging' environment in Q2 earnings miss
Papa John's (PZZA) is citing a "challenging operating environment" for its second-quarter earnings miss, missing by earnings of $0.01 per share and underperforming revenue expectations by more than $18 million. Yahoo Finance Reporter Brooke DiPalma details CEO Robert Lynch's outlook following this quarter, including prioritizing value and his confidence in competing in the delivery landscape.
Video Transcript
- All right, switching gears. Shares of Papa John's have been fluctuating. Now, on the plus side, they did miss estimates in the latest quarter. Pizza company citing a, quote, "challenging operating environment." Yahoo finance's Brooke DiPalma spoke to CEO Robert Lynch earlier today and joins us now with more insight. What was your takeaways from that conversation?
BROOKE DIPALMA: Yeah, well, there was quite a few. I mean, inflation really took a toll on Papa John's back in April. And now, they're looking to work back from that. But really, North America, the big story there, same store sales down 1% in North America as a result of a 2% actual increase in company-owned stores offset by a 2% decrease in franchisee restaurants.
Rob Lynch telling me that that miss was driven by those franchisees who really tried to hold on to margins in this hyperinflationary environment. He did say that they drove some significant price increases that were kind of inconsistent with what the consumer really expects and the value that they're looking for at Papa John's. And now, as they look to the rest of the year, they're really trying to close that performance gap between company-owned and franchise-owned restaurants.
He said to Yahoo Finance that they're going to help their franchisees rise up to the level that the company restaurants are performing. And one way that they're going to do that is by doubling down on value. Now, he said that the brand really does well in a tough economic environment, given the value that they offer.
And while quick service restaurants doing a-- you know, a quick comparison there, he said that they're seeing lower transactions. But Papa John's growing transactions. He said that our value relative to traditional quick service restaurants has never been stronger with offerings like that Doritos, Cool Ranch, Papadia for $7.99. And he is bullish on the back half of the year.
The company now expects full year same store sales to be flat up to 2%. They did note that it's not going to be enough to offset what went-- what happened, rather, in the front half of this year. But I also had to ask him about his perspective on that recent announcement between Domino's and Uber Eats. And he said, well, Domino's is coming in. But we've been competing.
He said that, quote, "We're still the leader. We're going to hold that position. We're focused on it. It's a big source of growth for us. So I say, the more, the merrier." Of course, Papa John's went into that space of aggregators about 4 years ago. They're on Uber Eats, DoorDash, and Grubhub. And he said that when they made the decision, it was a strategic decision. And Lynch mentioned before, he said that they've been competing already in this space. And so bring it on.
- All right, pizza for dinner. Brooke DiPalma, thank you. All right.
