Third quarter results reveal that global pizza chain Papa John’s continues to struggle financially.
System-wide North America comparable sales declined by 9.8% in the three months ending 30 September, and international comparable sales fell by 3.3%, while total revenue decreased by 15.7% to $364,007. Net income has also decreased by a total of 159.7%.
Papa John’s image has suffered following racist remarks made by former chairman John H. Schnatter’s racist remarks in July this year.
The company’s stock fell by 17% following the incident and Schantter has since resigned.
GlobalData senior foodservice analyst Morgane Richert says: “The pizza delivery market, especially in the US, is saturated and extremely competitive. Pizza Hut’s sales were flat and Domino’s missed analyst expectations as well, so add a scandal of the magnitude that Papa John’s experienced this year to the mix and it’s no surprise that the company performed so poorly.
“There is so much competition out there now, not just from other pizza chains but from fast-growing food delivery platforms as well, that companies in this sector really can’t afford drawn out, heavily mediatized public scandals.”
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Papa John’s has attempted to improve the brand and distance itself from Schnatter with the release of a new ad campaign featuring a diverse group of employees and franchisees.
Following this campaign, the company saw a “modest improvement in traffic” with improved same-store sales in September compared to the summer, according to CEO Steve Ritchie.
Ritchie said: “During the quarter, we took important actions resulting in improved consumer sentiment and North America comp sales that were slightly ahead of expectations. 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.”