There are two good reasons why Papa John's International Inc.'s (PZZA) John Schnatter isn't gone or forgotten from the company he founded.
Schnatter tendered his resignation as board chairman of Papa John's on Wednesday, July 11, after it was reported by Forbes that he used the N-word during a media training session in May.
Schnatter owns a 29% stake in Papa John's, as of Thursday, July 12, according to Bloomberg data, and, as founder, he has deep know-how the Louisville, Ky.-company needs, Neil Saunders, managing director of GlobalRetail Data, told TheStreet.
"The board made a cosmetic move to show that they've punished him and are taking action,' Saunders added. "The board can benefit for his expertise, which I assume is why he was left on the board. That might also be why investors are happy."
On Wednesday after the news of the training sessions was made public, the pizza company's stock dropped 5% for the day and closed at $48.33. At Thursday's close, it was up 11% at 53.67.
"I see the [stock] boost as a response to decisive action," Dorothy Crenshaw, a crisis management expert and principal of Crenshaw Communications in New York City, told TheStreet on Thursday. "In the eyes of consumers, it might even enjoy a short-term sales uptick based on the brand awareness coupled with the positive change."
"The company isn't out of the woods yet," she added. "It needs to demonstrate that it sincerely repudiates Schnatter's behavior, and it needs to do it through actions, not just words."
Schnatter isn't new to charges of racial insensitivity. In November, when he was still company CEO, he blamed weak sales on the controversy of NFL players taking a knee during the national anthem before games, in protest to police brutality against blacks. His comments at the time led to Schnatter stepping down as CEO and the company losing its designation as the official pizza of the NFL, a role it had held since 2010.
Stephens analyst Will Slabaugh wrote in a note on Thursday "We believe this [Schnatter's resignation as board chair] helps to stem what had likely become an elevated risk of losing various partnerships/sponsorships, though conclusions are difficult to draw at this point."
Schantter's reputation, though, has also taken a hit in his hometown of Jeffersonville, Ind., across the Ohio River, from Louisville, where he committed to donate $800,000 to help upgrade the town's fieldhouse in exchange for having his name on the building. The town's mayor Mike Moore told TheStreet on Thursday that he ordered Schnatter's name, written as John H. Schnatter, removed from the building on Wednesday afternoon after he conferred with associates and one person he knew at Papa John's in response to the Forbes article. To date, the town has received $400,000. Moore said he mailed a check for $400,000 back to Schnatter on Thursday.
Not that Schnatter needs the dough. According to a May 2018 proxy statement filed with the Securities and Exchange Commission, Schnatter's annual compensation is $1 million. In addition, his stake in the company is worth about $511 million as of Thursday.
The company declined to respond to multiple requests from TheStreet, regarding Schnatter's compensation and whether Schnatter's picture will remain on the logo.