Papa John’s shares plunged more than 10 percent in early market trading after reporting Tuesday evening that same-store sales in North America declined 5.3 percent in the first quarter.
Total revenue, at $427 million, fell 4.9 percent compared to the first quarter of 2017, largely because of the lower comparable store sales in North America. Sales at comparable stores outside of North America increased 0.3 percent.
Operating income dropped by 37.5 percent. Net income, at $16.7 million, fell 41.1 percent. Diluted earnings per share fell 35.1 percent, to 50 cents.
President and CEO Steve Ritchie said in a news release that the results “were consistent with our expectations.”
The company reaffirmed its prior earnings projections for the year, saying that “we expect our initiatives will result in improved sales and operating results in the last half of the year.”
Shares on Wednesday morning fell more than 10 percent before recovering. Shortly before 10 a.m., shares were trading for $55, down 6.3 percent. The Dow Jones industrial average was up 0.29 percent.
The Louisville-based pizza company said that margins at company-owned restaurants in the U.S. fell 2.7 percent, in part because of lower sales, but also because of higher labor costs, including higher minimum wages.
Papa John’s also said that its results were negatively affected by higher advertising spending in the United Kingdom; an increase in average outstanding debt related primarily due to share repurchases; and a 9.1 percent rise in general and administrative costs, “primarily due to an increase in bad debt expense, higher legal fees and an increase in various technology initiative costs.”
In the first quarter, Papa John’s repurchased more than 2 million shares at a cost of nearly $120 million. For the quarter, shares rose 2.6 percent. The Dow fell 2.5 percent. However, in the last 12 months, Papa John’s shares have lost more than a quarter of their value, while the Dow has gained about 16 percent.
Papa John’s founder John Schnatter, stepped down as CEO early in the year, shortly after the company apologized for Schnatter’s comments suggesting that the NFL’s failure to stop players from kneeling during the national anthem had hurt the company’s sales.
In late February, Papa John’s announced that the company and the NFL had mutually agreed to end their sponsorship agreement. Pizza Hut, a subsidiary of Louisville’s Yum! Brands, quickly took over as the official pizza sponsor of the NFL.