Executives of Papa John’s International, Inc. in fiscal 2020 expect strong earnings per share companywide and continued improvement in North American comparable store sales growth, but in late February the coronavirus appeared to have affected the company’s stock price negatively. The coronavirus has affected 210 restaurants in China, which has the company anticipating a negative impact of 50 to 100 basis points, said Robert M. Lynch, president and chief executive officer, in a Feb. 26 earnings call to discuss fiscal-year financial results. CNBC reported Papa John’s temporarily closed 50 franchised stores in China because of the coronavirus. The company’s stock price on the Nasdaq closed at $61.51 per share on Feb. 26, which compared with a close of $67.35 on Feb. 25. The coronavirus outbreak comes as Papa John’s is showing continued improvement in sales and earnings following a turbulent 2018. That year founder John Schnattner resigned after admitting to using a racial slur in a conference call. Papa John’s in the fiscal year ended Dec. 29, 2019, sustained a loss attributable to common shareholders of $7,633,000, which compared with net income of $2,474,000, or 8c per share on the common stock, in fiscal 2018. Preferred stock dividends and accretion accounted for a loss of $12,499,000 in fiscal 2019. Total revenue in fiscal 2019 declined 2.6% to $1,619,248,000 from $1,662,871,000. In the fourth quarter, the loss attributable to common shareholders was $5,612,000, which compared with a loss of $12,868,000 in the fourth quarter of the previous year. Fourth-quarter total revenue increased 5% to $417,514,000 from $397,566,000. In North America, fourth-quarter comparable store sales increased 3.5%, which compared with a decline of 8.1% in the previous year’s fourth quarter. Papa John’s in 2020 expects e.p.s. of 60c to 90c and adjusted e.p.s of $1.35 to $1.55, which would compare with adjusted e.p.s. of $1.17 in fiscal year 2019. In North America, comparable store sales are expected to increase in the range of 2.5% to 5% in 2020. “The midpoint of this range would represent our best performance in North America since 2015,” Mr. Lynch said in the Feb. 26 earnings call. “We expect international comp sales to grow between 1.5% and 4%, as we see strong growth globally, somewhat mitigated by the impacts of coronavirus in China.” In North America, comparable store sales dropped 2.2% for the year, which was still an improvement from a decline of 7.3% in fiscal 2018. Internationally, comparable store sales increased 1.1% for the fiscal year, which compared with a decline of 1.6% in the previous fiscal year. Mr. Lynch said the pizza chain’s new Garlic Parmesan Crust performed well in the fourth quarter. “We fundamentally believe that increasing awareness of our product quality with our dough as the star of the show is the key to our success,” he said. “Many of our customers and prospective customers still don’t know that our original dough is always fresh, never frozen, made with six simple ingredients, and that it contains no artificial colors or flavors. People have never cared more about what goes into their food, and with our product, we have a right to win now more than ever.” Papadias Italian flatbread-style sandwiches are also new additions to the menu. “We are focused on delivering innovation that does not negatively impact our operations, and the way we’re doing that is we’re developing these innovations with core ingredients,” Mr. Lynch said. “Papadias doesn’t use one new ingredient. So our supply chain doesn’t change. How we hold things on the line doesn’t change.” Papa John’s has a target goal of launching a new item about every two months in 2020, he said. – Source: Food Business News.
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