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Papa John's Cuts Sales Outlook, Suspends Dividend Amid Weak North America Demand; Shares Sink

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Papa John's Cuts Sales Outlook, Suspends Dividend Amid Weak North America Demand; Shares Sink

Papa John's International's (PZZA) shares slumped Thursday after the company lowered its full-year sales forecast and suspended its dividend amid weakness in its North American business.

The pizza restaurant operator now expects global system-wide restaurant sales to fall 2% to 4% this year, down from its prior outlook range of flat to down low-single-digits. North America comparable sales are now seen declining 6% to 8%, compared with the company's previous guidance of down 2% to 4%. For international comparable sales, Papa John's expects growth of 1% to 3%, down from its earlier range of a 2% to 4% increase.

The company's board has decided to suspend its quarterly dividend starting in the third quarter to shift capital allocation towards its transformation strategy acceleration, it said in an earnings release.

Addressing ongoing media speculations regarding a potential sale, Papa John's Chief Executive Todd Penegor said the pizza chain wasn't interested in selling itself following a strategic review. "We believe it is in the best interest of the company and all of our shareholders to focus 100% of our attention on Papa John's transformation," Penegor said on an earnings conference call Thursday, according to a FactSet transcript.

The company's plunged nearly 16% in afternoon trade, bringing its year-to-date losses to 35%.

Revenue for the quarter ended June 28 decreased 8.8% year over year to $482.4 million, compared with the FactSet-polled consensus of $481.2 million. Adjusted earnings rose to $0.46 a share from $0.41 a year earlier, versus Wall Street's $0.45 views.

Global system-wide restaurant sales fell 4.8%, driven by lower North America comparable sales and a decline in global net restaurants on a trailing 12-month basis, which outweighed gains in international comparable sales, the company said in the release.

"Second-quarter results reflected continued momentum in our international business, where we delivered our seventh consecutive quarter of positive comparable sales, and ongoing headwinds in North America, driven by the softer consumer environment, lower order volumes, and a highly promotional (quick-service restaurant) marketplace," Penegor said in the release.

Separately, Papa John's said it appointed Chris Lyn-Sue as global chief marketing officer and John Matter to the newly created role of global chief development officer.

Also on Thursday, Restaurant Brands International (QSR) posted better-than-expected second-quarter earnings amid strong comparable sales growth at Burger King across domestic and international markets.

Recently, Domino's Pizza (DPZ) reported fiscal second-quarter revenue above market estimates, while KFC parent Yum Brands (YUM) logged stronger-than-expected earnings.

Price: $24.60, Change: $-5.15, Percent Change: -17.31%

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