Fast-food pizza chain Papa John’s (NASDAQ:PZZA) fell short of analysts' expectations in Q2 CY2024, with revenue down 1.3% year on year to $507.9 million. It made a non-GAAP profit of $0.61 per share, improving from its profit of $0.59 per share in the same quarter last year.
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Papa John's (PZZA) Q2 CY2024 Highlights:
- Revenue: $507.9 million vs analyst estimates of $520.9 million (2.5% miss)
- EPS (non-GAAP): $0.61 vs analyst estimates of $0.53 (14.2% beat)
- Gross Margin (GAAP): 31.6%, in line with the same quarter last year
- EBITDA Margin: 9%, down from 10.2% in the same quarter last year
- Free Cash Flow of $12.8 million is up from -$1.07 million in the previous quarter
- Locations: 5,883 at quarter end, up from 5,772 in the same quarter last year
- Same-Store Sales fell 2.7% year on year (-1.2% in the same quarter last year)
- Market Capitalization: $1.40 billion
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 6% over the last five years was mediocre, but to its credit, it opened new restaurants and expanded its reach.
This quarter, Papa John's missed Wall Street's estimates and reported a rather uninspiring 1.3% year-on-year revenue decline, generating $507.9 million in revenue. Looking ahead, Wall Street expects sales to grow 1.4% over the next 12 months, an acceleration 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 1% 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 same-store sales fell 2.7% year on year. This decrease was a further deceleration from the 1.2% year-on-year decline it posted 12 months ago. We hope the business can get back on track.
Key Takeaways from Papa John's Q2 Results
We were impressed by how significantly Papa John's blew past analysts' gross margin expectations this quarter. We were also glad its EPS outperformed Wall Street's estimates. On the other hand, its revenue unfortunately missed analysts' expectations. Overall, this quarter was mixed but with some key positives. The stock remained flat at $42.53 immediately following the results.
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.