The drop stings even more because the stock was already down more than 22% for the year before this report came out.
The core problem shows up in the company's North American sales. Revenue at North American locations open for at least a year decreased 8.3% from the same period last year. Analysts had expected a drop of about 7%, so the miss was worse than Wall Street braced for.
CEO Todd Penegor blamed the slump on "the softer consumer environment, lower order volumes, and a highly promotional market." In plain English: customers are ordering less, and rivals are fighting hard over the orders that do exist.
Papa John's tried to fix things by adding new food. The pan pizza and sandwiches were supposed to bring people in. Instead, diners stuck with the older, familiar items on the menu.
"In an environment where you want to make sure every one of your dollars works as hard as possible for yourself, you do kind of go back to your tried and true favorites," Penegor told analysts. He added that the new items should bring in customers eventually, but admitted, "We're just not seeing that in the environment today."
The numbers back that up. Revenue came in at $482.4 million, down 9% from a year earlier. That was just barely above the $481.4 million analysts expected, which tells you the bar was not very high to begin with.
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Papa John's has been looking for ways to reverse its slide. Management considered several options, including a possible sale, and an April report said investment firm Irth Capital and a major North American franchisee are teaming up on a bid to take Papa John's private.
The company has been under pressure for a while. Before this report, the stock had already fallen more than 22% this year, and management had been exploring options including a possible sale. The April report about Irth Capital and a major franchisee bidding to take the company private fits into that pattern.
Papa John's is now resetting expectations. The company expects North American comparable sales to fall 6% to 8% this year. That is a big step down from its earlier forecast of a 2% to 4% decline, and it is a clear sign the chain does not see a quick fix coming.
Management is taking several steps. Papa John's will shift its advertising on third-party sites and delivery apps to stand out more. It will also suspend its quarterly dividend to free up cash for business investments.
The company is still working on its goal of closing roughly 300 North American locations before 2027 ends. In the latest quarter, it shut 48 more stores than it opened.
The leadership team is also shifting. Jenna Bromberg, the current chief marketing officer, leaves in August. Chris Lyn-Sue, who runs international operations, will become the global chief marketing officer.
Papa John's has company in its struggles. Domino's Pizza and Pizza Hut, two of its biggest rivals, have also seen demand weaken lately. Domino's, the top pizza seller by revenue, posted essentially flat second-quarter comparable sales last month as its pricier new items underperformed and order sizes shrank.
Pizza Hut's parent, Yum! Brands, agreed in June to sell the chain to buyout firm LongRange Capital, exiting the pizza business entirely.
The common thread is a consumer who is tired of high gas and grocery prices. When every dollar has to stretch further, pizza becomes a treat, not a default. And with chains discounting heavily to grab whatever demand is left, nobody wins the profit game.
Penegor says Papa John's does not want to just slash prices to move pies. "We don't want to just discount to drive transactions," he said. "We want to make sure the consumer understands the total experience is worth what you pay."
That is a reasonable strategy. But it depends on customers eventually feeling comfortable enough to pay up. Until that confidence returns, pizza chains are fighting for the same shrinking slice of the pie, and that is a fight no investor should assume anyone wins easily.
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