Papa John’s blames Papa John for big sales decline

A Papa John's pizza box

FBN's Cheryl Casone with more.

Pizza chain Papa John's said Tuesday that its sales fell 10.5 percent in July, with CEO Steve Ritchie reportedly blaming the company's struggles on the scandal concerning founder John Schnatter's use of the N-word.

The Kentucky-based company reported a same-store sales decline of 6% at North American store locations in its second quarter, outpacing the decline expected by analysts.

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. The former CEO was caught in a negative media storm, along with his company, when his use of a racial slur during a conference call was leaked and publicized.

Papa John's is spending a lot of dough on its image. Stevie Ritchie, the president and current CEO acknowledges this diminished performance.

Papa John's has hired new agencies - Endeavor Global Marketing on creative and Weber Shandwick's Powell Tate on PR, to help it try to mitigate the situation.

"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.

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".

"Today's results highlight the further deterioration of Papa John's financial performance under the tenure of Steve Ritchie, since he assumed CEO responsibilities in mid-2016", Schnatter said.

"I am not going away and will continue to fight to do what's best for the company and its employees, franchisees, shareholder and customers", Schnatter said.

"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, not be distracted by the words and comments of one individual, but look forward to move this brand forward", Ritchie said at the end of the call.

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.

The pizza chain slashed its sales outlook for the year after reporting a third straight quarter of sales declines in North America.

For Papa John's, value also really matters, with pizza chains seemingly constantly offering some price-focused deal or another pretty much all of the time.

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