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Jul 13, 2020

Papa John's hits record as chain moves past Schnatter turmoil

Papa John's launches new Shaq-inspired pizza

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Papa John’s International Inc. shares hit an all-time high, a sign the company has recovered from the controversy generated by its former chairman.

The pizza chain’s stock rose as much as 2.4 per cent to US$90.96 in New York, surpassing the previous intraday high set in December 2016. The shares have risen about 43 per cent in 2020 -- making Papa John’s a rare instance of restaurant success amid the upheaval of COVID-19.

In June, Papa John’s reported a third consecutive month of double-digit growth for same-store sales -- a key metric of restaurant performance. Expansion in North America reached 24 per cent for the five weeks that ended June 28.

“Those are huge numbers,” said Brian Yarbrough, an analyst with Edward Jones. Before COVID-19, pizza chains were seeing monthly same-store sales growth of about three per cent to five per cent, he said.

The gains show how the company’s fortunes have rapidly shifted following controversies in recent years generated by its founder John Schnatter. These include the use of a racial slur on a conference call, lawsuits with the company and a feud with the NFL over players’ kneeling during the U.S. anthem to protest police brutality against Black people.

Schnatter, who for years served as the company’s chief executive officer and chairman and remains one of the company’s top 10 shareholders, has said the slur was taken out of context and that he’s the victim of a smear campaign. He has vowed to set the record straight.

Amid cratering sales and a slumping stock, activist investor Starboard Value LP took a stake in Papa John’s last year, leading to an overhaul of management and its board, with former Arby’s executive Rob Lynch taking over as CEO. The company also added NBA hall of famer Shaquille O’Neal as an investor and board member.