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Sales slump worsens at Papa John's

08 August 2018

"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.

Showing just how hard it will be to divorce its image from its founder's, Papa John's said it may not be until next year that the process of collecting all materials with Schnatter's image from its stores would be complete.

Ritchie said that Papa John's made the decision to distance itself from Schnatter after he said in November that the National Football League protests hurt sales.

Papa John's said same-store domestic sales slid 6.1 percent in the April-June period, the third straight quarterly decline.

Schnatter stepped down as chairman last month after his use of a racial slur during a May media training session went public. "While results have been challenged by recent events, we are committed to these strategic priorities and continue to believe that they will lead to enhanced performance".

Schnatter, who remains Papa John's biggest shareholder and a board member, has a different take. He said in a statement that he is 'not going away'.

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 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".

The company also revised its estimates and now expects comparable sales in North America to decline between 7 and 10 percent this year "because of the negative media coverage and customer sentiment", said CFO Joe Smith.

During a conference call with Wall Street analysts, Ritchie said the company's internal research had shown the need to move away from marketing campaigns centered on one person, such as the chain had used for years under Schnatter's leadership.

Papa John's CEO Steve Ritchie is seen above in a Twitter photo.

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

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

Shares fell more than 10% to $36.83 in after-hours trading.

Sales slump worsens at Papa John's