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Papa John's sales plunge 16% after founder John Schnatter's racial slur controversy

"Papa John" suing Papa John's
"Papa John" Schnatter suing Papa John's 01:19

This past summer wasn't just embarrassing for Papa John's — it was downright dismal for the pizza chain, which saw sales drop an astounding 16 percent, or $67.7 million, in the three months ending Sept. 30. 

That's the highly publicized period when Papa John's founder, John Schnatter, was excoriated for using a racial slur during a P.R. training call and faced consumer boycotts, resigned as the chain's chairman, picked a fight with the new CEO, criticized his company's handling of the controversy, and ultimately sued it.

Another key metric was down nearly 10 percent in the third quarter. Sales at comparable stores in North America, which excludes the effects of store openings and closings, dropped 9.8 percent from the year before, the company said Tuesday. It had a loss of $20 million on $364 million in sales for the quarter, before adjustments.

It's the third straight quarter of dropping sales for Papa John's. Less than a year ago, Schnatter gave up his CEO role after blaming the nationwide controversy over kneeling National Football League players for slowing sales growth at the company, which was an NFL sponsor and advertiser. He remains a major shareholder, however.

As CEO Steve Ritchie diplomatically put it during a conference call with analysts Tuesday: "Our third-quarter results reflect the brand challenges we experienced this year."

Ritchie outlined a turnaround plan on the call, including a more robust marketing campaign aimed at boosting consumer trust in the brand. He said consumer sentiment was shifting from "largely negative" to "neutral," but acknowledged there was a long way to go. "Q3 is the start of our journey to make Papa John's a revitalized, modern brand," he said.

The company expects sales for the year to be 6 to 9 percent lower than last year's $1.7 billion, executives said.

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