Papa John’s cuts earnings forecast on public spat with founder

NEW YORK (Reuters) – Papa John’s International Inc (PZZA.O) on Tuesday posted a second-quarter comparable sales decline of 6.1 percent in North America and cut its forecast for the coming months, as a heated spat between the pizza chain and its founder dragged on profits.

The Papa John’s store in Westminster, Colorado, U.S. August 1, 2017. REUTERS/Rick Wilking/File Photo

Papa John’s estimated its full-year comparable sales will slip between 7 and 10 percent and lowered profit expectations, citing fallout from the company’s acrimonious split with former Chairman John Schnatter.

Schnatter, the public face of the company and its largest shareholder, was ousted last month following reports that he had used a racial slur on a media training conference call.

Negative publicity surrounding the incident depressed July traffic in North America, the company said in a statement, noting that it was hard to predict how long and how badly that would affect sales.

Shares of Papa John’s closed down nearly 3 percent, and slumped an additional 10 percent after the bell. The stock has lost 48.2 percent of its value over the last 12 months.

The company said it now expected to earn $1.30 to $1.80 per share, down from its previous estimate of $2.40 to $2.60.

In a statement following the chain’s results, Schnatter blasted Chief Executive Steve Ritchie for the company’s declining performance and vowed to continue to fight for the company he had founded.

“Instead of addressing the real and fundamental issues … 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,” Schnatter said.

Schnatter’s image has been removed from Papa John’s promotional material and the company launched a third-party audit into the brand’s culture. In its Tuesday quarterly filing, Papa John’s estimated the costs of these measures at $30 million to $50 million for the rest of the year.

Reporting by Alana Wise; editing by Jonathan Oatis and Richard Chang

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