Papa John’s Stops Bleeding as Sales Fall Less Under New Chairman

(Bloomberg) -- Papa John’s International Inc.’s sales topped analyst estimates, indicating the pizza seller is getting its mojo back under new management. The stock rose in extended trading.

• Comparable sales in North America fell 6.9 percent last quarter, beating projections for a 7.3 percent fall and slowing the recent pace of declines. The results are the first under new chairman Jeffrey Smith.

Key Insights

• The chain is pushing to bolster its advertising, and in March brought in a new global marketing head from Subway Restaurants. Papa John’s also recently enlisted NBA legend Shaquille O’Neal as a brand ambassador, director and investor. “Substantial, positive change takes time and effort,” Chief Steve Ritchie said.
• Since February, activist shareholder Starboard Value has invested $250 million in Papa John’s and named Smith, Starboard’s chief executive officer, as chairman of the pizza maker.
• The results signal that Papa John’s is moving past the controversy over founder John Schnatter, who used a racial slur on a conference call last year, taking a toll on the company’s and reputation. Still, the incident isn’t totally behind the company, which disclosed $4.9 million in short-term royalty reductions in the quarter to help keep struggling franchises afloat.
• Separately, the company said Tuesday in an amended annual filing that it found some “material weaknesses’’ in its internal financial reporting controls -- but that it won’t have to restate earnings as a result.

Market Reaction

• The shares jumped as much as 8.4 percent in late trading Tuesday. They have gained 29 percent so far this year, recouping last year’s 29 percent loss.

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• For the company statement, click here.

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