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Papa John's Q3 sales plummet shows damage done after negative publicity

Papa John's Q3 results are a painful reminder of the damage a leader's ill-chosen words can do to company performance, according to the brand's current leadership.

November 7, 2018

In Papa John's first first full-quarter financial report since news broke that founder, John Schnatter had used racial slurs during a media training call, the company Tuesday relayed just how badly the flood of negative publicity has affected its performance including another plunge in North American same-store sales — this time of 9.8 percent for the quarter, according to the company.  

As a result, the company reported a consolidated pretax quarterly loss of $20 million for the quarter, compared with a Q3 consolidated pretax quarterly gain of $30.9 million. The bottom line was an open wound to the company — which bills itself as the world's third largest pizza brand - of a $50.9 million loss over last year's quarter.

Other Q3 results include: 

• 5.5 percent drop in quarterly revenues attributed to $24.8 million in special charges incurred relating to its publicity problems.
• Adjusted EPS down 66.7 percent quarter over quarter.
• Loss per diluted share of $0.41.
• Adjusted earnings per diluted share of $0.20, excluding Special items, from $0.60 in Q3 2017.
• 3.3 percent drop in international comparable sales. 
• 10 percent increase in total international sales, driven by unit growth.
• 31 company-owned Minnesota restaurants refranchised.
• $98.8 million cash flow from operations. 
• 2018 EPS outlook narrowed to a range of $1.30 to $1.60.

Nonetheless, the company's leadership was hopeful for the future, with President and CEO Steve Ritchie saying during its earnings call Tuesday that there are early signs that the brand is slowly beginning to win back consumers.

"During the quarter, we took important actions resulting in improved consumer sentiment and North America comp sales that were slightly ahead of expectations," Ritchie said. "While the operating environment remains challenging, these early indicators combined with our strong cash flow give us confidence in the consumer initiatives underway across the company."