Papa John's sales drop amid founder controversy

Marco Green
August 8, 2018

In a lengthy statement issued Tuesday, Schnatter said the latest earnings results "highlight the further deterioration of Papa John's financial performance under the tenure of Steve Ritchie".

Papa John's International, Inc.'s same-store sales continued their slide in the second quarter.

Papa John's says a key sales figure dropped 10.5 percent in July, and that it can't predict how long and badly it will be affected by the fallout with its founder.

Schnatter, who remains a board member and owns about 30 percent of the company, sued his fellow board members last month for not standing behind him, and he has called for Ritchie's ouster.

Papa John's denied Schnatter's claims in a statement.

In a press release announcing the results, president and CEO Steve Ritchie said the chain had begun changing how the company marketed its products, "to refocus on quality and better connect with customers".

Schnatter would admit the remark and apologize, but later say his words were taken out of context and that he regrets giving in to pressure step down as chairman of the company's board.

The pizza chain has struggled in recent quarters amid tough competition from rivals Pizza Hut and tech-savvy Domino's.

"We are not dependent, nor should we be, on one person", Ritchie said. About 80 percent of the company's 3,400 restaurants in North America are owned by franchisees.

"I couldn't be more excited than I ever have been in my 22 years with the Papa John's brand to flip the switch and look forward (and) not be distracted by the words and comments of one individual", Ritchie said. A $12.99 bundle didn't help sales much in the second quarter. Pizza Hut replaced Papa John's as the NFL's official pizza sponsor last February. "Accessible value does have an important role to play", he said.

Papa John's is still searching for the right candidate to be its next CMO. For now, Ritchie is overseeing marketing, as he has been since the May departure of short-tenured CMO Brandon Rhoten.

'Sometimes the greatest opportunities happen in the most inopportune times, ' Ritchie said. "We have a complete, unified Papa John's family, both internal and external, that is behind the vision and the mission to move this brand forward".

Revenue was down by 6.2 percent to $408 million and net income fell by just under 50 percent to $11.8 million, or 36 cents per share, down from $23.5 million, or 65 cents per share in the quarter ended June 25, 2017.

In an interview with The Associated Press last week, Schnatter said the chain's troubles reflect its move away from marketing its 'roots, ' including his disappearance from TV and radio ads starting late previous year.

Other reports by Click Lancashire

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