As John Schnatter, the 56-year old veteran CEO of Papa John’s International (NASDAQ:PZZA) who also founded the company and gave it his name, steps down, the question that arises is what led to the decision?
While the incoming CEO and current chief operating officer Steve Ritchie tried with a somewhat ambiguous answer that it's "the right time to make this change," market watchers like us believe that a recent public relations disaster has forced the company to take such a decision.
This move is probably an indication that the board is trying to steer clear of further controversies. Last month, Schnatter criticized Papa John’s long-time partner NFL’s leadership for not handling players who kneeled during the national anthem properly, protesting against racism and police brutality. He cited the incident as a reason behind NFL's ratings and image going down and consequently hurting Papa John's sales.
On Nov 1, Schnatter, on a conference call about the company's earnings said that, ”the NFL is hurting, and more importantly by not resolving the current debacle to the player and owner's satisfaction, NFL leadership has hurt Papa John's shareholders”. "The controversy is polarizing the customer, polarizing the country," he added.
His comments were widely criticized on social media and the company apologized for it later. The situation attracted more controversy by impressing white supremacists who praised Schnatter for his comments. The company condemned the racist group immediately saying that it did not want them to buy their pizza.
Ritchie will take helm on Jan 1 while Schnatter will continue to be the chairman of the company.
Meanwhile Shares Continue to Plummet
Shares of Papa John’s have lost 33.5% value year to date, as against 14.1% growth recorded by the industry. With this unfavourable trend, the current-quarter and current-year earnings estimates have been revised downward by 18.3% and 2.5% respectively, over the past 60 days. Therefore, the bearish trend in price is expected to continue going forward.
A Tough Task at Hand for Ritchie
He is taking up responsibilities at a time when the company is facing tough challenges. While costs related to sales initiatives coupled with forex headwinds weigh on profits, a choppy sales environment in the restaurant space continues to limit revenue growth.
Papa John's International, Inc. Revenue (TTM)
In the last reported quarter, global restaurant sales growth of 4.4% was lowe