Papa John's (NASDAQ:PZZA) Misses Q1 Revenue Estimates

Radek Strnad /
2024/05/09 7:18 am EDT

Fast-food pizza chain Papa John’s (NASDAQ:PZZA) fell short of analysts' expectations in Q1 CY2024, with revenue down 2.5% year on year to $513.9 million. It made a non-GAAP profit of $0.67 per share, down from its profit of $0.68 per share in the same quarter last year.

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Papa John's (PZZA) Q1 CY2024 Highlights:

  • Revenue: $513.9 million vs analyst estimates of $543.1 million (5.4% miss)
  • EPS (non-GAAP): $0.67 vs analyst estimates of $0.56 (19.1% beat)
  • Gross Margin (GAAP): 31.4%, in line with the same quarter last year
  • Free Cash Flow was -$1.07 million, down from $40.4 million in the previous quarter
  • Same-Store Sales were down 2% year on year (miss)
  • Store Locations: 5,914 at quarter end, increasing by 189 over the last 12 months
  • Market Capitalization: $1.88 billion

“Our teams are taking a disciplined approach to running the business, improving restaurant-level margins and increasing operating profits despite a challenging environment in the first quarter,” said Ravi Thanawala, Papa Johns Interim Chief Executive Officer and Chief Financial Officer.

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 5.7% over the last five years was weak , but to its credit, it opened new restaurants and expanded its reach.

Papa John's Total Revenue

This quarter, Papa John's missed Wall Street's estimates and reported a rather uninspiring 2.5% year-on-year revenue decline, generating $513.9 million in revenue. Looking ahead, Wall Street expects sales to grow 3.8% over the next 12 months, an acceleration from this quarter.

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Same-Store Sales

Same-store sales growth is a key performance indicator used to measure organic growth and demand for restaurants.

Papa John's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 0.9% year on year. This performance isn't ideal and the company should reconsider its growth strategy before opening new restaurants with its precious capital.

Papa John's Year On Year Same Store Sales Growth

In the latest quarter, Papa John's same-store sales fell 2% year on year. This decrease was a further deceleration from the 1.5% year-on-year decline it posted 12 months ago. We hope the business can get back on track.

Key Takeaways from Papa John's Q1 Results

Papa John's same-store sales and revenue unfortunately missed analysts' expectations. On the other hand, operating profit beat. Zooming out, we think this was a mixed quarter. The stock is flat after reporting and currently trades at $56.9 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.