Papa John's sales fall as founder attacks CEO

08 August, 2018, 12:53 | Author: Billie Castillo

"As you know, recent weeks have been challenging", President and CEO Steve Ritchie said as he kicked off the call, in what might be the corporate understatement of the year.

The pizza giant, Papa John's, hit an extremely rough patch after the PR nightmare caused by its founder John Schnatter.

And it hired Nimbus in June as its first multicultural agency, Papa John's said Tuesday.

North America comparable sales were down by 6.1 percent for the quarter that ended on July 1, before the tumultuous month that saw founder John Schnatter step down as chairman of the board, followed by the board distancing the brand from him. The sales decline became even steeper after Schnatter's use of the n-word and other racial slurs on a May conference call in May with Laundry Service, the chain's creative agency at the time, came out in a July 11 Forbes article.

"Clearly it's a hard time for the Papa John's brand, but there is a way forward", he said. Executives attributed the decline to "recent events" and reiterated that they are reviewing the company's culture. And Schnatter, who remains its largest shareholder, even issued his own financial chart.

Reiterating previous comments, Ritchie said in the earnings release: "We have also begun an external audit of Papa John's culture and will address any improvements that are recommended at its conclusion".

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"The research and analysis we conducted after comments by our founder in November of 2017 have made it clear that we needed to move away from a founder-centric marketing plan", Ritchie said. Meanwhile, Domino's Pizza has seen sales increase. "Instead of addressing the real and fundamental issues confronting the Company since that time period, and taking actions to turn sales around, the Company is trying to deflect attention from the source of the problem - management's ongoing failures with regard to financial performance - and blame me for its problems".

"We are not dependent, nor should we be, on one person", Ritchie said.

"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. Pizza Hut replaced Papa John's as the NFL's official pizza sponsor last February.

Papa John's has banned Schnatter from all media appearances and enacted a "poison pill" measure to prevent Schnatter from acquiring a controlling stake in the company.

Papa John's shares are down more than 20% so far this year.

Shares fell more than 10% after hours.

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