Papa John's Swings to Profit Despite Virus Impact

Papa John's first-quarter earnings swung to a profit, but revenue expectations fell short amid the economic shutdown.
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Papa John's  (PZZA) - Get Report swung to a first-quarter earnings, but missed Wall Street's revenue expectations as the restaurant chain contended with the economic shutdown sparked by the coronavirus pandemic.

Shares of the Louisville, Ky., chain at last check were up 1.5% to $77.27.

Papa John's reported net income of $8.4 million, or 15 cents a share, compared with a loss of $1.7 million, or 12 cents, in the year-earlier quarter. FactSet's consensus estimate called for earnings of 39 cents a share. 

Papa John's said that on a like-for-like basis with consensus, adding back 26 cents of temporary franchise support which analysts have excluded in their estimates, the company actually reported earnings of 41 cents per share.

Revenue rose to $409.9 million from $398.4 million a year earlier, but missed FactSet's call for $413 million.

Systemwide North America comparable sales increased 5.3%, while international comparable sales rose 2.3%.

Papa John's in a statement cited "many uncertainties related to the Covid-19 pandemic." In late March, the company withdrew its financial outlook for 2020.

The company said it had been in discussions with its major suppliers and currently has not seen material disruptions in its supply chain.

"We have sufficient cash on hand to support our current operations and we have access to approximately $350 million from our credit facility, should we need it," Papa John's said.

Roughly 375 of its 2,100 international stores are temporarily closed, mostly in Europe, Latin America, and the Middle East in accordance with government policies. 

A limited number of restaurants remained closed in the China and South Korea markets, which were hit earliest by the coronavirus outbreak. Some international markets are open only for delivery, such as in the U.K. 

Substantially all the traditional restaurants in North America remain open and fully operational, Papa John's said, while a number of non-traditional restaurants located in universities and stadiums are temporarily closed. 

The non-traditional locations "are not significant to our revenues and operating results," the company said.

While March sales in North America were hurt by the cancellation of large gatherings, including major sporting events, the company said, its domestic businesses have performed well, as customers and communities rely on Papa John's and others in the food-delivery industry. 

"The demand for carry-out and delivery across our markets has increased over the past several weeks," Papa John's said.