The N-word remark by Papa John’s founder caused sales to crater 10.5% in July

There are some things that just cannot be unsaid.

It’s a lesson that Papa John’s executives and shareholders are learning the hard way.

“Very inexcusable and irresponsible comments” by company founder and former CEO John Schnatter caused same-store sales in July to plunge by about 10.5 percent, current CEO Steve Ritchie told analysts Tuesday in explaining the company’s worse-than-expected performance during the the second quarter and drastically lowered sales forecasts for the year.

That’s not going to improve any time soon. The company, which reported earnings after the market closed, lowered its outlook for comparable stores, saying executives now expect sales at stores open for at least a year to fall between 7 percent and 10 percent this year. Papa John’s previously estimated that they wouldn’t fall by more than 3 percent.

Its shares plummeted by almost 12 percent in aftermarket trading Tuesday.

Ritchie told analysts on the earnings call he believed the “significance of the decline” took place in July and said it was too early to share data from August. He reiterated that pizza sales were still being hurt by comments made by Schnatter during an earnings call last November in which he blamed the NFL for soft pizza sales.

Schnatter criticized the NFL, which Papa John’s sponsored, for failing to curtail players kneeling during the national anthem to protest police brutality against people of color. The matter got even worse after Forbes reported last month that Schnatter used the N-word on a May conference call.

Those comments ultimately led to Schnatter stepping down as CEO in December. In July, he was forced to give up his post as chairman after the May call came to light.

Schnatter owns nearly 30 percent of the company’s shares and remains on the company’s board as a director. 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.

“Sometimes the greatest opportunities happen in the most inopportune times,” Ritchie said on the call. “I couldn’t be more excited than I ever have been in my 22 years with the Papa John’s brand to flip the switch and look forward, not be distracted by the words and comments of one individual but look forward to move this brand forward.”