Papa John's International's (PZZA) chief financial officer's departure likely suggests a sharp operational turnaround is unlikely in the near term at the pizza chain, BofA Securities said in a note Monday.
Last month, Papa John's appointed Chris Collins as interim finance chief, replacing Ravi Thanawala, who will take on the CFO role at apparel retailer American Eagle Outfitters (AEO).
"We think it's unlikely (Thanawala) would have left his post after less than three years if he believed a sharp turnaround were imminent," BofA analysts Sara Senatore and Grace Nguyen said.
The brokerage downgraded its rating on Papa John's stock to underperform from neutral and decreased the price target on the company's shares to $34 from $42.
Papa John's global comparable sales fell 4% in the first quarter, driven by weakness in North America. In May, the company set its full-year global system-wide restaurant sales outlook at flat to down low single-digits, with North American comparable sales projected to decline 2% to 4%.
"The disruption that comes with management turnover -- particularly at a time when Papa John's is trying to execute a turnaround -- may translate into less earnings predictability," Senatore and Nguyen said.
BofA said competitive intensity in the pizza segment has risen, allowing larger operators such as Domino's Pizza (DPZ) to achieve lower costs and better unit economics, particularly in challenging operating environments.
"We believe the pizza segment's competitive intensity stepped up further in (second quarter) and high frequency data suggest Papa John's sales growth was largely unchanged through the quarter, despite a Toy Story 5 tie-in launched in late May," Senatore and Nguyen added.
Papa John's is scheduled to report second-quarter results Aug. 6.
The brokerage now projects Papa John's North American same-store sales to decline 6.7% for the second quarter, compared with a 6.4% drop previously expected.
For 2026, BofA lowered its revenue forecast to $1.88 billion from $1.89 billion and cut the earnings-per-share projection to $1.65 from $1.87.
Papa John's stock dropped 0.6% in Monday trade, and has fallen nearly 14% this year.
Price: $33.12, Change: $-0.37, Percent Change: -1.10%
