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Shares of Papa John's remained choppy in morning trading Wednesday just a day after the pizza chain released second-quarter earnings that missed nearly every key estimate tracked by Wall Street and said pizza sales would be significantly worse than previously forecast.
On Tuesday's earnings call, "management admitted that 'recent weeks have been challenging' — our candidate for the restaurant industry's understatement of the year," Mark Kalinowski, CEO of Kalinowski Equity Research, wrote in a note to investors Tuesday.
Same-store sales between July 2 and July 29 were down about 10.5 percent, which current CEO Steve Ritchie blamed on founder John Schnatter's most recent media blunder and was exacerbated by the ensuing boardroom drama that looks to continue well into August and beyond.
Papa John's lowered its outlook for same-store sales, expecting sales at stores open for at least a year to decline by 7 to 10 percent this year. This new forecast implies that same-store sales in the second half of the year will drop between 8.5 percent and 14.5 percent, according to BTIG analyst Peter Saleh.
One franchisee, who asked not to be named, told CNBC last month that sales at his shops have fallen by between 5 and 20 percent, depending on the location, since the founder's public misstep.
The company's stock was down more than 6 percent in early morning trading. Since hitting an all-time high of $90.49 per share in December 2016, Papa John's stock has lost more than half its value on disappointing same-store sales growth that executives blamed on everything from increased competition from other pizza chains to the National Football League's handling of player protests during performances of the national anthem last fall.
"We continue to see an uncertain path to recovery and believe a sale of the company is unlikely, as founder John Schnatter continues to advocate for more control, not less," Saleh wrote in a research note Wednesday.
He added that the "ongoing drama" between Schnatter and current management was "destroying shareholder value."
The feud has been brewing since November when Schnatter criticized the NFL, which Papa John's sponsored, for mishandling player protests during the national anthem. Those comments ultimately led to Schnatter stepping down as CEO in December.
He remained chairman of the board until July, when Forbes reported that Schnatter used the N-word on a May conference call. Since then, the board of directors has stripped Schnatter's image off the company's marketing materials and barred him from using his office at the company's Louisville, Kentucky, headquarters.
Schnatter countered with a lawsuit, accusing the board of acting negligently and staging a possible coup to get rid of him.
And the quarrel continued this week.
Current CEO Steve Ritchie on Tuesday blamed weak sales on Schnatter's highly publicized media gaffes, while Schnatter shifted the responsibility back to his former protegé Ritchie.
"In our view a complete separation of Mr. Schnatter from the Papa John's business is the right thing to do," Kalinowski said. "However, Mr. Schnatter continues to dig in his heels and — as an approximate 30 percent shareholder and board member — has very different ideas on what's best for the business."
In late July, the board took an additional step of enacting a shareholder rights plan, or a "poison pill," to prevent Schnatter from acquiring a controlling stake in the company.