Papa John's Int'l Inc. (PZZA) May Regret Blaming the NFL

Wayne Duggan

If Papa John's Int'l Inc. (Nasdaq: PZZA) thought it could sway public opinion by blaming weak third-quarter sales on football players taking a knee during the national anthem at National Football League games, it made an expensive miscalulation.

PZZA stock fell 10 percent last week after Papa John's CEO John Schnatter blamed weak 1 percent growth in domestic pizza sales on slumping NFL TV ratings. "The NFL has hurt us by not resolving the current debacle to the players' and owners' satisfaction," Schnatter said. "NFL leadership has hurt Papa John's shareholders."

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To make matters worse, a white supremacist website declared Papa John's the "official pizza" of the alt-right, forcing Papa John's to issue a statement disavowing its racist supporters. "We do not want these individuals or groups to buy our pizza," the company said in a statement.

Schnatter's criticism of the anthem protests seemed a bit odd to some onlookers, and some sports analysts are speculating that he is being influenced by Dallas Cowboys owner Jerry Jones, who has been an outspoken opponent of the anthem protests and as promised that anyone on his team who kneels during the anthem will not be allowed to play.

Papa John's has been the official pizza of the Dallas Cowboys for 13 years. As part of the sponsorship deal in 2004, Jones acquired a 49 percent ownership interest in 71 Papa John's locations. As of 2014, Jones owned more than 100 Papa John's franchises and he appeared in a Papa John's commercial in 2012.

In October, Jones led a conference call involving 17 NFL owners in which he discussed ways the league could block a contract extension for NFL commissioner Roger Goodell.

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Jones has criticized Goodell for not imposing a league-wide rule forcing players to stand for the national anthem. Now that a major NFL sponsor like Papa John's has said Goodell's decision-making is hurting business, Jones may have more leverage in convincing other owners to vote Goodell out of office.

John's domestic pizza sales growth fell well short of the 8.4 percent growth competitor Domino's Pizza ( DPZ) reported in the third quarter, but Stevens analyst Will Slabaugh says improving NFL ratings could provide a boost to Papa John's same-store sales.

"Equally important, in our view, is the company's ability to establish a consistent value platform that has proven to be a reliable traffic driver for many of PZZA's peers, including DPZ," Slabaugh says. "Despite the lowered guidance in the near term, we would note that the company has a significant opportunity to tap into unused customer data in the coming months."

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Stevens has an "overweight" rating and $80 price target for Papa John's stock.

Wayne Duggan is a freelance investment strategy reporter with a focus on energy and emerging market stocks. He has a degree in brain and cognitive sciences from the Massachusetts Institute of Technology and specializes in the psychological challenges of investing. He is a senior financial market reporter for Benzinga and has contributed financial market analysis to Motley Fool, Seeking Alpha and InvestorPlace. He is also the author of the book "Beating Wall Street With Common Sense," which focuses on the practical strategies he has used to outperform the stock market. You can follow him on Twitter @DugganSense, check out his latest content at tradingcommonsense.com or email him at wpd@tradingcommonsense.com.