November 6, 2018 / 9:27 PM / 10 days ago

Papa John's new advertising blitz helps North America restaurant sales

(Reuters) - Papa John’s International Inc (PZZA.O) on Tuesday reported a smaller-than-expected decline in quarterly comparable sales in North America, helped by new advertising and rebranding as it tries to recover from bad publicity stemming from an acrimonious split with its founder.

FILE PHOTO: The Papa John's store in Westminster, Colorado, U.S. August 1, 2017. REUTERS/Rick Wilking/File Photo

The Louisville, Kentucky-based company said it now expects full-year North America comparable sales to decline in the range of 6.5 percent to 8.5 percent, compared to a prior outlook for a 7 percent to 10 percent decline.

The news sent the company’s shares up about 4 percent.

Papa John’s has been trying to rebound after battling with its founder John Schnatter over control of the company. Schnatter was booted as chairman following his usage of a racial slur during a conference call in July.

To counter the bad publicity, the company revamped its advertising, removed Schnatter as the brand’s spokesperson, as well as his images from promotional materials, and launched a third-party audit into the brand’s culture.

Papa John’s said its newly-launched campaign “Voices of Papa John’s” featuring employees and the chain’s franchisees owners helped improve traffic in September.

“We are seeing improved consumer sentiment. Our attention now is on activating that sentiment to drive increased sales,” Chief Executive Officer Steve Ritchie said on a post-earnings call with analysts.

The company reported a 9.8 percent sales decline in North America in the third quarter ended Sept. 30. Analysts on average had expected a 10.9 percent drop, according to IBES data by Refinitiv.

Papa John’s is also focusing on providing assistance to franchises in North America, its biggest market, tackling food-servicing pricing and online fees through 2018.

But the company’s plans are coming at a cost. Papa John’s said it now expects special charges including rebranding and franchise support to be about $50 million to $60 million this year - higher than the earlier anticipated cost of about $30 million to $50 million.

Papa John’s reported a net loss attributable to the company of $13 million or 41 cents per share, compared to a profit of $22 million or 60 cents, a year earlier.

Excluding items, Papa John’s earned 20 cents per share missing analysts’ estimates of 22 cents.

Revenue fell 15.7 percent to $364.01 million, missing Wall Street estimates of $393.7 million.

Reuters had reported last week that private equity firms including Bain Capital and CVC Capital Partners were interested in buying the pizza chain.

Reporting by Soundarya J in Bengaluru; Editing by Bernard Orr

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