Papa John’s International Inc. (NASDAQ:PZZA) stock was down 2.95% in late morning trading on July 27. Shares have dropped 20% in 2018 so far. The American restaurant franchise has been mired in controversy which began when founder John Schnatter criticized anthem protests by NFL players back in 2017. Schnatter was replaced as CEO in December 2017 but remained the largest shareholder and would still play a public role.
Papa John’s ended its NFL sponsorship deal in February after blaming anthem protests for its poor sales numbers. Things would go from bad to worse for Schnatter in the summer. This July it was reported that Schnatter used a racial slur during a conference call in May in reference to what he perceived as the lack of scrutiny faced by previous businesses who were deemed racially insensitive. Schnatter resigned as chairman of the board the day the story broke.
On July 26 Schnatter filed a lawsuit against the company he founded after he was denied access to the company’s books and records following his resignation. Papa John’s leadership has also implemented a poison pill strategy that is designed to limit Schnatter’s ability to buy back a majority stake.
It is hard to recommend buying low at Papa John’s at this current stage. Sales dropped again in its first quarter report in May and recent news is unlikely to provide a boost going forward. The stock has halved its value from its all-time high reached in late 2016 and investors should anticipate more carnage ahead of its third-quarter earnings release.
