Papa John’s Records Big Sales Decline
Papa John’s (NASDAQ: PZZA) recorded a big drop in sales in the latest quarter, stunning investors and analysts. The pizza chain reported that its same-store sales in North America fell 10.5 percent in July and 6.1 percent for the quarter. That was steeper than Wall Street expected, and marked the third straight quarter of declines.
Papa John’s also slashed its sales outlook for the year. For the year, the company now expects sales to fall 7 percent to 10 percent at established North American locations. The company had previously forecast the figure to be flat to down 3 percent. Shares fell more than 10 percent after the earnings announcement.
Papa John’s is still paying for the offensive remarks of its founder despite efforts to rehabilitate the brand. The fallout reached a fever pitch last November when founder John Schnatter criticized the NFL, which Papa John’s sponsored, for a sales drop. Schnatter blamed the NFL for failing to curtail players kneeling during the national anthem in protest of police brutality against people of color, thus hurting pizza sales on game days.
Then, Last month, Schnatter admitted to using the N-word during a conference call with a marketing firm, as well as making some other inappropriate statements regarding people of color. While he apologized when the incident was made public, he has since claimed that the comment was taken out of context and has criticized Papa John’s for the way it handled the matter.
Schnatter resigned as Papa John’s chairman soon after the conference call controversy erupted and the company quickly moved to remove Schnatter’s image from its marketing materials, where he featured prominently. Steve Ritchie, president and CEO of Papa John’s, said that Papa John’s stakeholders agreed with the company to remove Schnatter as the face of the company, saying “We are not dependent, nor should we be, on one person.”
The company remains in turmoil as the fallout continues. It has hired an outside auditor to investigate Papa John’s culture, including the company’s diversity and inclusion policies. The company is also preparing to respond to a lawsuit filed by Schnatter, who said he regrets resigning from his post as chairman. Schnatter remains on the company’s board and currently owns 29 percent of the company’s stock.