Papa John's shares tumble as pan pizza promotion fails to boost sales

Papa John's shares tumble as pan pizza promotion fails to boost sales
Papa John's shares tumble as pan pizza promotion fails to boost sales

"Similar to other restaurant operators, we believe Papa John's suffered from broad industry weakness in 4Q16 that likely weighed on comp results," Peter Saleh, a BTIG analyst, wrote in a research note Tuesday. "We had expected the October launch of pan pizza to drive more robust same-store sales growth compared to the decelerating trend seen this quarter, though we believe Papa John's still continued to gain market share."

Saleh told CNBC that Papa John's and rival Domino's have been doing much better than other restaurants because the chains have been able to adapt to the new ways that consumers want to purchase food, namely in the form of digital and mobile ordering. Saleh noted that Domino's and Papa John's sales are between 55 percent and 60 percent digital, the result of millions of dollars in investments in digital infrastructure.

Papa John's projects that its 2017 North America same-store sales growth will be between 2 percent and 4 percent and its international same-store sales will rise between 4 percent and 6 percent.

The company forecasts that EPS growth will be in the range of 8 percent to 12 percent.

Investors likely will want to hear more about pan pizza sales trends, general industry conditions and greater detail on the EPS outlook, including any headwinds management might be anticipating, Saleh said.

After the bell Tuesday, the pizza chain reported it earned $32.6 million, or 88 cents a share, in the fourth quarter.

After adjusting for non-recurring gains, it earned 69 cents per share on $439.6 million in revenue. Wall Street had expected earnings per share of 66 cents on $446.9 million in revenue, according to Thomson Reuters.

Last year, Papa John's earned $24.7 million, or 62 cents a share, on revenue of $416.8 million.

CNBC

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