National Post (National Edition)
Papa John’s founder lashes out as shares fall
John Schnatter thinks he’s the solution to Papa John’s International Inc. ’s sales slump. The company thinks he’s the problem. No matter who’s right, investors aren’t happy.
The pizza chain, where Schnatter resigned as chairman last month after using a racial slur, reported comparable sales in North America that fell 6.1 per cent in the latest quarter, worse than analysts had predicted. While the company continues to distance itself from its outspoken founder and largest shareholder, Schnatter blames the results on that fact that he’s no longer in charge.
Shares fell as much as 7.4 per cent on Wednesday, hitting the lowest intraday level in nearly four years.
“History shows that the company performs better with me involved, and it declines when I step away,” Schnatter said in a blistering statement following the release of quarterly results. “The company is trying to deflect attention from the source of the problem — management’s ongoing failures with regard to financial performance — and blame meforitsproblems.”
The pizza chain says Schnatter’s behaviour is weighing down performance, especially since news broke in mid-july that he’d used the offensive language. North American same-store sales fell 10.5 per cent last month, after the latest quarter ended, Papa John’s said in a filing Tuesday. The poor sales prompted the company to cut its profit forecast for the year. It has started removing Schnatter’s image from pizza boxes, and asked him to cease media appearances on behalf of the chain.
“John Schnatter’s comments are an attempt to distract from his own words and actions,” a company spokeswoman said Tuesday. “We have received strong support from our stakeholders for the actions underway, including the decision to remove Mr. Schnatter from the brand. We remain focused on the important work underway to move the company forward. We are confidentthatwecan.”
Due to the recent negative publicity, Papa John’s will incur “significant costs” for remodelling, a new ad campaign, a company audit and legal costs, the chain said in its earnings statement. It’s also giving financial assistance to franchisees who’ve been hurt by Schnatter’s statements “to mitigate closings,” it said.