Papa John’s earnings miss, weighed down by higher costs, but chain sees strong pizza demand

Papa John’s quarterly earnings missed estimates as higher food costs, a new corporate office and employee bonuses weighed on profits, even as demand for its pizza remains high.

The company’s stock fell more than 7% in premarket trading.

Here’s what the company reported on Thursday compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Earnings per share: 40 cents, adjusted, vs. 46 cents expected
• Revenue: $469.8 million vs. $467.9 million expected

The pizza chain reported fiscal fourth-quarter net income of $13.2 million, or 28 cents per share, up from a net loss of $2.1 million, or 18 cents per share, a year earlier.

It spent $6 million, or 12 cents per share, in the fourth quarter on its strategic reorganization, which includes opening a Georgia office. The company also paid out $2.7 million in end-of-year bonuses for its restaurant workers, shaving off 6 cents per share. Increased commodity costs also hit profits during the quarter.

Excluding reorganization costs, Papa John’s earned 40 cents per share, missing the 46 cents per share expected by analysts surveyed by Refinitiv.

Net sales rose 12.5% to $469.8 million, beating expectations of $467.9 million. Worldwide, its same-store sales surged 15.5% in the quarter.

North American same-store sales increased by 13.5%. Papa John’s also raked in higher royalties from its franchisees because its operator assistance program, which began in the wake of the scandal that involved founder John Schnatter. International same-store sales climbed 21.4% in the quarter.

Papa John’s opened 40 net new locations, primarily due to international openings. As of Dec. 27, about 65 of the company’s 5,400 locations were temporarily closed due to government restrictions, primarily in Latin America and Europe.

The company also shared an update on its plans to open an office in Atlanta. It’s on track to open the new corporate location by this summer. Papa John’s expects to spend $15 million to $20 million through 2021 related to the costs of adding the office, including employee severance, recruitment and relocation.

Papa John’s declined to provide an outlook for its financial targets during 2021, citing the uncertainty caused by the pandemic.