Papa John's Issues Bleak Earnings Announcement, Stock Plummets - Kogonuso

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Aug 8, 2018

Papa John's Issues Bleak Earnings Announcement, Stock Plummets

Papa John’s issued a dismal second-quarter earnings announcement after the close of markets on Tuesday, which revealed a 25% decline in earnings per share over last year’s numbers and falling sales both domestically and abroad. The pizza chain's stock immediately plummeted more than 8% in after-hours trading to under $38 per share, a five-year low.

In July, comparable sales declined 10.5% in North America, the report said. “At this time, the company cannot predict how long and the extent to which the negative customer sentiment will continue to impact future sale,” it added. Papa John’s reduced its outlook for sales in the remainder of 2018 from a 3% decline to a drop of between 7% and 10%.

Trouble at the company began in November 2017, when Schnatter partly blamed slowing sales at the business on national anthem protests in the NFL. Shares tanked 11% in hours, and he stepped down as CEO effective January 1.

The latest turbulence at the company traces to revelations uncovered in two reports published last month by Forbes. First, on July 11, news broke that Schnatter used the N-word during a media-training exercise designed to avoid future public-relations trouble. He admitted to the incident and resigned as chairman that night. Then, on July 19, Forbes published an extensive investigation into the company, which revealed a “toxic culture” and allegations of harassment and sexually inappropriate behavior against Schnatter and other executives. (Schnatter disputed the allegations leveled against himself, while Papa John's issued a statement saying that it took the claims seriously and that a third-party would conduct a full cultural audit of the business.)

Schnatter, who remains on the Papa John's board and is its largest individual shareholder, issued a statement following Tuesday’s earnings announcement. “I am seriously concerned about the company’s declining sales, financial performance and, most importantly, the direction the company headed under the stewardship of [current CEO] Steve Ritchie,” he said. According to multiple former employees, however, Schnatter remained heavily involved in corporate strategy even after resigning as CEO and only truly stepped away beginning July 11.

Reached for comment, a spokesperson for Papa John's said, in part, “John Schnatter’s comments are an attempt to distract from his own words and actions. We have received strong support from our stakeholders for the actions underway, including the decision to remove Mr. Schnatter from the brand."
https://www.geezgo.com/sps/34017

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