Founders and CEOs don't get pushed out of their companies right before a holiday with no succession plan in place just because sales are down and they made a slightly unpopular comment about the NFL. The stock market is reacting like this because something smells funny.
— Jason Clampet
Papa John’s International Inc. dropped the most in more than two weeks after outspoken founder John Schnatter abruptly announced plans to step down as chief executive officer.
Though Schnatter will hand the reins to longtime deputy Steve Ritchie, who already oversees operations, the move raised fresh questions about a company that’s suffered a sales slump this year. Schnatter also raised eyebrows in November when he blamed poor results on a controversy over NFL players kneeling during the national anthem.
Pete Collins, a spokesman for Papa John’s, said the CEO change stemmed from it being “the right time” for Ritchie to take the helm. The 43-year-old, who began as a Papa John’s customer-service rep making $6 an hour in 1996, has been chief operating officer for the past three years.
“We want to focus on what we do best — our people and our pizza,” Collins said.
For investors, the concern is that a CEO change won’t be enough to reverse a slowdown in same-store sales. The key benchmark has decelerated in the U.S. for four straight quarters.
The stock declined as much as 4.3 percent to $56.71, the biggest intraday drop since Dec. 6. Shares of the pizza chain have lost about a third of their value this year, putting them on course for the first annual decline since 2008.
Schnatter has long been high-profile figure in the restaurant industry. He has previously waded into political issues, such as slamming Obamacare. But the NFL remarks put a bigger spotlight on the executive, whose company is a top sponsor of the league.
Schnatter said in November that the player protests were mishandled by NFL leadership and hurt the pizza chain’s sales. Papa John’s later apologized for the “divisive” comments.
Schnatter, 56, will remain chairman of the company, which ranks as the third-largest pizza chain. Though the executive will continue to focus on product quality and customer satisfaction, he also plans to pursue “his personal passion for entrepreneurship, leadership development and education,” Papa John’s said.
The company takes pride in hiring from within, saying that 98 percent of its restaurant managers are promoted from hourly jobs. Ritchie worked as a delivery driver and store manager before becoming operating chief in 2014 and president in 2015.
As he takes the helm on Jan. 1, he’ll have to cope with slowing growth. Papa John’s shares fell 8.5 percent in a single day during November — the biggest drop in two years — after same-store sales missed analysts’ estimates.
In explaining the disappointing results, Schnatter pointed a finger at NFL Commissioner Roger Goodell, arguing that the national-anthem controversy was hurting ratings — and, in turn, sales of his pizza.
“The NFL has hurt us by not resolving the current debacle to the players’ and owners’ satisfaction,” Schnatter said at the time. “NFL leadership has hurt Papa John’s shareholders.”
Goodell critics have said that he should force players to stand for the anthem.
Later that month, the Louisville, Kentucky-based company said it didn’t intend to be polarizing with the remarks.
“We believe in the right to protest inequality and support the players’ movement to create a new platform for change,” the company said. “We also believe together, as Americans, we should honor our anthem. There is a way to do both.”
©2017 Bloomberg L.P.