Papa John’s shares jumped Wednesday morning after reporting that sales were showing signs of life and on news this week that its founder and former CEO John H. Schnatter had hired a consultant to weigh selling his 31% stake in the company.
The Louisville-based pizza chain’s CEO, Steve Ritchie, said in an earnings call that the company had taken steps to slow the sales decline and to repair the reputational damage it had sustained from its dispute with Schnatter.
At 10 a.m., shares were trading for $53.71, up 4.5% from Tuesday’s close. Shortly before 10:30 a.m., however, much of the gain had evaporated, and shares were up just 0.9%. The S&P 500 was down slightly.
The company Tuesday evening had said that revenue for the quarter that ended March 31 fell 11.4%, to nearly $400 million. Total costs and expenses, at $393 million, declined by 6.9%.
Papa John’s said it incurred a net loss of $1.7 million in the first quarter, compared to a profit of $17.4 million a year earlier.
Nonetheless, Ritchie told analysts that the company in the quarter “took large strides strengthening the foundations of our business.”
He also said that year-over-year sales declines were getting smaller. Restaurant sales in North America were down 8.1 percent in the fourth quarter, 10.5 percent in January, but just 6.9 percent for the first quarter overall.
Ritchie said January sales had been dragged down by “ineffective promotions” as the company converts to a new loyalty program.
He said that North American results “continue to be impacted by the consumer sentiment challenges our brand (has) experienced.”
In March, after months of acrimony between the company and Schnatter, the parties agreed to a settlement that saw the founder resign from the board. According to SEC filings from this week, Schnatter also has hired a consultant to weigh selling his 31% stake in the company. Schnatter owns/controls about 10 million shares, with a value of about $540 million.
Ritchie said that the company has taken steps including the launch of a foundation and the hiring of former NBA star Shaquille O’Neal as a spokesman to overcome some of the reputational damage the brand has sustained from controversial statements of its founder.
In a news release, Ritchie said: “I am confident in the long-term success of Papa John’s. With the additional $200 million of financial resources from Starboard, we will make targeted investments in the highest return initiatives that showcase our quality and improve the customer experience.”
The company in February had entered into an agreement with Starboard pursuant to which the private equity firm would acquire $200 million of the pizza chain’s preferred stock.