Wall St.Journal 27Feb2020

THE WALL STREET JOURNAL. ** Thursday, February 27, 2020 |B3

Papa John’s International

Inc. expects to return to sales

growth this year.

The pizza chain Wednesday

said it expects comparable

sales, or those at restaurants

open at least a year, would rise

between 2.5% and 5% this year

in the U.S. and Canada. That

would mark a reversal from flat

sales in 2019 and a drop in

2018, after controversial state-

ments by founder and former

Chief Executive John Schnatter

alienated some customers.

Those challenges continued

to weigh on the company in its

fourth quarter. Papa John’s re-

ported a loss of $5.6 million

for the quarter. That was an

improvement from the loss of

$12.9 million it reported a

BYHEATHERHADDON

founded and that still bears

his name. He reported a 6%

stake earlier this month, down

from 30% last year.

Mr. Lynch said he is trying

to improve the company’s

sluggish sales by introducing

new products., such as sand-

wiches made out of the chain’s

freshly-made dough and garlic

parmesan pizza crust.

Mr. Lynch said the naming

of former basketball star Sha-

quille O’Neal as a brand

spokesman and board member

last year has helped it com-

pete without having to turn to

discounts. “We are not focused

on delivering the cheapest

pizzathatwecanmake,”Mr.

Lynch told investors.

Papa John’s reported that

comparable sales rose 3.5% in

the latest quarter in North

America and total revenue

rose to $417.5 million, beating

forecasts from analysts polled

by FactSet. After adjustments,

the company’s profit of 37

cents beat forecasts from ana-

lysts by five cents.

Papa John’s lost customers

in 2017 after Mr. Schnatter at-

tributed the company’s slow-

ing sales to the way the Na-

tional Football League was

handling players’ protests dur-

ing the national anthem. In

December of that year, he

agreed to step down as CEO

amid a backlash.

Mr. Schnatter resigned as

chairman of the board in July

2018, after it emerged that he

had used a racial slur during a

conference call. Papa John’s

sales plummeted. Same-store

sales dropped 5% in 2018, and

were flat last year.

Papa John’s and its board,

led by activist investor Jeff

Smith of Starboard Value LP,

last year recruited Mr. Lynch

from Arby’s Restaurant Group,

to turn Papa John’s around.

Mr. Lynch has hired executives

from other big chains such as

Taco Bell to be part of new

company leadership.

Mr. Schnatter, meanwhile,

is steadily reducing his hold-

ings in the company he

year earlier. Papa John’s

shares fell 8.7% to $61.51.

The company noted in a fil-

ing that it has closed roughly

50 franchised stores in China

due to the coronavirus, and

that the virus’s spread could

affect international same-store

sales targets for this year.

Early signs of a turnaround

at Papa Johns add more com-

petition to the U.S. pizza mar-

ket. Top chains including

Domino’s Pizza Inc., Pizza Hut

and Little Caesars Pizza are

battling for customers, intro-

ducing new products, dis-

counts and services to try and

win their dollars.

Unlike its rivals, Papa John’s

has struck deals with multiple

third-party delivery services in

a bid to boost sales. The com-

pany said Wednesday it is us-

ing DoorDash Inc. to supple-

ment its own fleet of drivers at

peak times.

“We are working with them

to create a symbiotic relation-

ship,” Chief Executive Rob

Lynch said in an interview.

Papa John’s Sees Growth

Pizza chain expects

sales gains this year,

tapping third-party

delivery services

BUSINESS NEWS

Guests at Shaquille O’Neal’s Papa John’s Block Party in Atlanta last August. Mr. O’Neal was named a board member last year.

TODD KIRKLAND/AP IMAGES FOR PAPA JOHN’S

U.S. officials warned of a
new E. coli outbreak linked to
Jimmy John’s Gourmet Sand-
wiches, the latest in a string of
food-safety problems at the
sandwich chain in recent years.
The Centers for Disease
Control and Prevention and the
U.S. Food and Drug Adminis-
tration said Wednesday that
they are investigating an out-
break of E. coli O103 that they
said was likely tied to clover
sprouts served at Jimmy
John’s restaurants. Fourteen
people from five states have
been reported to have fallen ill
in the outbreak, the agencies
said.
Jimmy John’s, which was
acquired last year by Arby’s
owner Inspire Brands Inc.,
said it had stopped serving
sprouts altogether and was co-

L BrandsInc. took a nearly
$700 million charge to write
down the value of its Victoria’s
Secret chain, an accounting hit
that pushed the retailer into a
loss for the holiday quarter.
The company agreed last
week to sell a 55% stake in the
lingerie business, which in-
cludes the Pink chain, to pri-
vate-equity firm Sycamore
Partnersfor $525 million. The
deal valued the business at $1.1
billion and will create a sepa-
rate private company.
Victoria’s Secret, which long
dominated the U.S. lingerie
market, recently has struggled
with slumping sales and has
been losing customers to up-
starts with more inclusive siz-
ing and marketing. Revenue in
the U.S. and Canada dropped

operating with officials to

identify the supplier connected

to the outbreak.

“Food safety and the welfare

of our customers are our top

priorities,” said James North,

president of Jimmy John’s.

Health officials said con-

sumers should throw away any

leftover sandwiches from

Jimmy John’s made with clover

sprouts. Officials are still in-

vestigating to determine

whether tainted sprouts were

served at other restaurants or

retailers.

The investigation follows a

warning letter the FDA sent to

the chain last week saying that

Jimmy John’s had been impli-

cated in multiple food-safety

outbreaks in recent years and

repeatedly sold tainted fresh

produce.

—Heather Haddon

contributed to this article.

BYJESSENEWMAN

E. coli Outbreak Tied

To Sandwich Chain

about 8% to $6.8 billion last

year and the business’s operat-

ing income plunged 78%.

L Brands, which also owns

Bath & Body Works, reported a

loss of $192.3 million for the

quarter ended Feb. 1, compared

with a profit of $540 million in

the year-ago period. Total

quarterly revenue slipped 3% to

$4.71 billion, as gains at Bath &

Body Works largely offset de-

clines at Victoria’s Secret.

The latest quarter’s results

included a $689.6 million good-

will charge and a $35.4 million

charge related to the impair-

ment of Victoria’s Secret

stores. L Brands took nearly

$250 million of charges related

to Victoria’s Secret in the third

quarter.

The company said it expects

to post another loss in the cur-

rent quarter.

BYKHADEEJASAFDAR

Victoria’s Secret

Write-Down Sends

L Brands to a Loss

182

100

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