Papa John's suspends dividend and cuts guidance after 8.8% revenue decline
Papa John's suspended its dividend and slashed profit guidance following a second-quarter revenue slump, highlighting a widening divergence in the pizza sector as rival Domino's maintains relative stability despite missing earnings targets.
Papa John's International plummeted 17.8 percent in trading on the sixth following the release of its second-quarter financial results before the market open. The steep decline extends a brutal run for the stock, which is now down 39 percent year-to-date and 49 percent over the trailing twelve months.
The sell-off was triggered by a broad contraction in the company's top-line metrics. Second-quarter revenue declined 8.8 percent, while system-wide restaurant sales fell 4.8 percent and net income dropped by $1 million to settle at $8.7 million.
Management simultaneously signaled a defensive posture for the coming year by suspending its dividend and lowering its profit outlook. The company reduced its EBITDA guidance to a midpoint of $185 million, down from a previous projection of $200 million, and confirmed plans to close between 200 and 250 North American locations in 2026.
Despite the severe top-line headwinds, the chain did manage to improve its profitability metrics during the period. Adjusted earnings per share increased to 46 cents from 41 cents, supported by slight expansions in gross, operating, and net profit margins of 29, 18, and four basis points, respectively.
The results underscore a widening gap between Papa John's and its larger rival, Domino's Pizza, which has seen its shares fall just 18 percent year-to-date and 23 percent over the past year. Domino's reported second-quarter revenue of $1.19 billion, representing a 4.3 percent increase that surpassed analyst expectations.
However, Domino's is also navigating a sluggish consumer environment and failed to meet Wall Street projections on the bottom line. United States same-store sales grew by a mere 0.1 percent, missing estimates, prompting Loop Capital to downgrade the shares to Hold from Buy due to concerns over transaction growth.
Market commentators have noted the stark contrast in operational trajectories between the two pizza chains. Summarizing his view on the sector, Jim Cramer noted that Papa John's is "just terrible, and got rid of the dividend" while recommending a hold on Domino's due to its leadership and upcoming menu additions.
For investors, the divergent fortunes of the two chains illustrate the intense pricing pressure currently squeezing the restaurant sector. While Domino's continues to grow its overall order count despite industry turmoil, Papa John's is being forced to shrink its physical footprint and cut shareholder returns to preserve capital.
