- Papa John’s announced the appointment of a new CEO.
- PZZA stock rose more than 7% in morning trade on Tuesday.
PZZA rose early
Papa John’s (PZZA) stock rose more than 7% in morning trade on Tuesday following the news about the new CEO’s appointment. Papa John’s announced the immediate appointment of Rob Lynch as the president and CEO. Lynch was the president of Arby’s. He will replace Steve Ritchie. Investors celebrated the news. Lynch is known for his ability to turn around companies and drive strong growth.
Lynch has “proven record transforming organizations and realizing the growth potential of differentiated brands,” according to Jeff Smith, the chairman of Papa John’s board of directors. The company needs a sharp turnaround. Papa John’s has struggled to lift sales and its image.
PZZA’s image took a hit after its founder, John Schnatter, used a racial slur on a conference call in July last year. Since then, the company has seen dwindling comparable sales. Following the controversy, Schnatter resigned as the chairman of the board.
Lynch faces the uphill task of lifting comparable sales growth and reviving Papa John’s image. Under his leadership, Arby’s delivered comps growth for 16 consecutive quarters. Also, Arby’s reported strong sales and profits last year.
Weak sales impacted PZZA stock
PZZA stock has risen about 10% on a YTD (year-to-date) basis as of Monday. However, the stock has fallen nearly 18% since it posted weak first-quarter sales and earnings on May 7. The company’s top and the bottom line continued to fall in the second quarter.
Papa John’s global restaurant sales fell 3.8% despite being up against easy YoY (year-over-year) comparisons. The company’s system-wide North America comps fell 5.7% in the second quarter. Notably, the company’s North America comps fell 6.9% in the first quarter.
PZZA posted an adjusted EPS of $0.28 in the second quarter—down about 42% YoY. The adjusted EPS missed analysts’ estimate of $0.30.
In the first half of 2019, Papa John’s posted an adjusted EPS of $0.59, which was significantly lower than $0.99 reported during the first half of 2018.
Among the nine analysts covering the PZZA stock, five recommend a “buy,” while four recommend a “hold.”