Papa John's turnaround efforts are finally working
Posted November 6, 2019 9:21 a.m. EST
CNN — For the first time in two years, Papa John's is growing in the United States.
Sales at North American stores open at least a year ticked up 1% in the third quarter, following seven straight quarters of declines. Shares of the company rose about 4.5% before the bell on the news.
CEO Rob Lynch, who stepped into the top role just two months ago, said in a statement on Wednesday he is "very pleased" with the results. He added that "there is much work to do."
The company also announced a series of management changes on Wednesday. Three executives, Chief Operating and Growth Officer Mike Nettles, Chief Marketing Officer Karlin Linhardt and Chief Financial Officer Joe Smith, are all departing the company.
The changes are the latest in a series of steps the company has taken to move on from the scandals caused by its founder John Schnatter.
In November 2017, Schnatter — then CEO and chairman of the board -— was criticized for blaming slowing (but still positive) sales on the NFL leadership's handling of athlete protests. The following summer, after he had stepped down as CEO, it was revealed that he used the N-word on a conference call, sparking his resignation as chairman. Schnatter is still the company's largest shareholder.
To distance itself from the controversial founder, Papa John's has updated its marketing campaign, conducted an internal audit into the company's culture and ran mandatory anti-bias training for employees. It tapped an outsider, Lynch, who was formerly the president of Arby's, to become its new president and CEO. And it hired a new spokesperson, Shaquille O'Neal, as brand ambassador and board member.
To help drive sales, the company has invested in its menu. On Monday, the pizza chain announced the addition of a garlic Parmesan-flavored pizza crust, its first new flavor option for its original dough in 35 years.
As Papa John's slowly returns to growth in the United States, competition in the pizza sector is heating up. Domino's reported 2.4% growth at US stores open at least a year in the third quarter, but that marks a slowdown from the 6.3% spike it achieved in the same period the year before. In a statement discussing this year's results, Domino's CEO Ritch Allison pointed to a "unique competitive environment."
And Pizza Hut said in September sales at restaurants open at least a year rose in the last quarter and sales were up 10% overall compared to the year before. Its new partnership with the NFL, which replaced Papa John's, helped boost its bottom line.
— CNN Business's Jordan Valinsky contributed to this report.