LOUISVILLE, Ky. (WDRB) -- Papa John’s International CEO John Schnatter blamed "controversy" surrounding the National Football League on Wednesday for the pizza company’s disappointing sales growth in the three-month period ended Sept. 24.
The Louisville-based company’s stock slid 8.5 percent in trading Wednesday after it cut expectations for earnings and sales growth for the full year.
Without mentioning NFL Commissioner Roger Goddell by name, Schnatter blamed the league’s “leadership” for allowing “controversy” to push down TV ratings this year, thus hurting the company’s sales.
Though he wasn't specific, Schnatter was referring to a wave of player protests during the pre-game renditions of the National Anthem, which started in 2016 with former San Francisco quarterback Colin Kapernick and drew the ire of President Trump earlier this year.
“This should have been nipped in the bud a year and a half ago,” Schnatter said during prepared remarks at the start of the company’s quarterly earnings call with Wall Street analysts. "Like many sponsors, we are in contact with the NFL and once the issue is resolved between the players and the owners, we are optimistic that the NFL’s best years are ahead. But good or bad, leadership starts at the top, and this is an example of poor leadership.”
After declining 8 percent during the 2016 season, NFL TV ratings were down another 7.5 percent through the first six weeks of the 2017 season, ESPN reported last month, citing Nielsen data.
Papa John’s is one of the league’s biggest TV advertisers and the most recognized brand associated with the NFL, company executives said on Wednesday’s call.
When an analyst asked how the company managed to grow sales during last year’s NFL season despite the league's ratings dip from 2015, Schnatter said football had to compete with the presidential election in 2016, but this year’s problems are self-inflicted.
“You need to look at exactly how the ratings are going backwards. Last year the ratings for the NFL went backwards because of the elections. This year the ratings are going backwards because of the controversy," Schnatter said. "And so, the controversy is polarizing the customer; polarizing the country."
An NFL spokesman did not immediately return a call for comment.
Papa John's executives said they still expect the company's sales to grow in 2017 and in 2018, which would mark 14 consecutive years of growth from the prior year.
But the company cut its guidance for sales growth in North America, by far its biggest division. Same-store sales are now expected to be up by no more than 1.5 percent for 2017, while the company previously said it anticipated growth of 2 to 4 percent.
The company also cut its expected full-year earnings per share and raised its expected level of debt relative to profits.
Papa John's shares are down about 23 percent this year while its larger competitor Domino's Pizza Inc. is up more than 11 percent.
While the company's stock was hammered Wednesday, Papa John's third-quarter earnings of 60 cents per share were in line with Wall Street analysts' expectations, and the company's $432 million in revenue was higher than analysts projected, according to data from FactSet.