Papa John Causes Papa John’s Sales and Profits to Plunge, Says Papa John’s

The financial pie is getting smaller at Papa John’s, the U.S. pizza chain that has tried to distance itself from founder John Schnatter, who was forced out as company chair after he admitted that he used a racist term during a May 2018 conference call. Schnatter owns 29% of the company and retains a board seat.

Schnatter departed after the end of the company’s second quarter, which saw a drop of more than 50 in earnings to $11.7 million compared to the year-ago quarter, while revenue dropped 6.1% to $408 million. Both earnings and revenue were far short of analyst expectations.

But sales have fallen off a cliff since then, and the company said that instead of expecting a roughly 3% drop in revenue in the third quarter, it would be between 7% and 10%. Analysts expect deeper drops in stores open more than a year, according to CNBC, and one anonymous franchise holder said income was down 5% to 20% across his stores.

Papa John’s stock has also taken a hit, after running up to nearly $90 in late 2016, it’s now trading at close to $41.

The company had already experienced a decline in its fortunes in 2017, which may have been tied to Papa John’s close association with the NFL, which experienced waves of criticism from all sides for how it handled players who decided to kneel during the playing of the national anthem for what they called a protest of police brutality. NFL ratings declined.

In November, Schnatter blamed the NFL’s handling of the protests for his firm’s sales declines. He left the CEO position on January 1, 2018, without a reason given. The NFL and Papa John’s severed their relationship in February 2018.

Finally, Forbes reported in July that Schnatter had used a racial epithet referring to black people (the “N word”) during a call with company executives and a marketing firm hired to help prevent future public-relations problems. Schnatter claimed that Colonel Sanders of Kentucky Fried Chicken had used the term to refer to people of color without repercussion to mitigate the seriousness of his remarks about the NFL protests. The board forced him out of the chair position the day after the Forbes report.

For his part, Schnatter released a statement following the earnings news that criticized the board of directors and current CEO, and backdated his concerns to 2016.

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