The Real Reason Papa John's Is Struggling With Inflation

It is no secret that economic inflation has been a concern for many Americans in 2022 (via Pew Research Center). What we don't always hear is how it's negatively impacted some corporations. According to The Guardian some corporations have used this time to increase prices and because they perceive the public as more willing to accept it. This has allowed these companies to achieve record breaking profits; however, some places haven't used that questionable tactic to combat inflationary pressures. One such place is Papa John's pizza.

During the pandemic's peak, pizza was one of the industries that experienced a boost in sales as people were forced to adjust their dining habits because of the pandemic (via Food Institute). As things have begun to reopen and gain a sense of normalcy, the question was whether these pizza chains would be able to maintain the boost in sales. Sadly, it appears Papa John's has been unable to do so now that inflation has begun to hurt the economy. Let's look at the reported sales figures and break down how the company has performed.

According to their second quarter report, Papa John's has seen a significant sales dip due to their difficulty with inflation (via Businesswire). Despite a marginal increase in their revenue, sales have been a mixed bag. In North America, their 0.9% sales increase in the second quarter of this year ushered in the company's 12th consecutive quarter of positive sales. While that number is down from the 5.2% increase from last year, the most significant decrease can be seen in their international sales. In the second quarter, international sales went down by 8% from last year's gain of 21.2%. This was due mainly in part to changing economic conditions in the U.K.

So, what else has contributed to the lower sales? According to the company, the supply chain crisis and inflation has had a direct impact on commodity costs which, combined with labor inflation and underwhelming international sales, has made it difficult to push up sales. Despite the current obstacles, the company has not lost hope. CEO Rob Lynch stressed the company would weather the recent economic storm and continue focusing on its competitive advantages and improving its value to Papa John's consumers.