Traders were betting against Papa John's long before the NFL's national anthem protests started

  • Short interest on Papa John's stock has been hitting multi-year highs for months, dating back to well before the NFL season.
  • The company saw shares drop 8.5% in a single day this week on weaker sales, which it blamed on NFL national anthem protests turning football fans off.
  • One analyst says the rise of delivery apps that make local pizza joints competitive is a better explanation for Papa John's struggles.

The CEO of Papa John's made waves earlier this week when he blamed the NFL national anthem protests for his company's flagging sales.

As it turns out, those trading Papa John's stock had started souring on the company well before the NFL season even started.

The blue line in the chart below shows Papa John's short interest — or a measure of wagers that a share price will drop — as a percentage of shares on loan. It repeatedly hit multi-year highs as far back as the first quarter, when football fans were still planning their Super Bowl parties for last season, according to data compiled by IHS Markit.

8 PHOTOS
John Schnatter, Papa John's pizza founder
See Gallery
John Schnatter, Papa John's pizza founder
NEW YORK, NY - JANUARY 31: John H. Schnatter, Founder, Chairman & CEO of Papa John's International, Inc. rings the NASDAQ Opening Bell at NASDAQ MarketSite on January 31, 2014 in New York City. (Photo by Rob Kim/Getty Images)
INDIANAPOLIS, IN - MAY 24: Papa John's founder and CEO John Schnatter attends the Indy 500 on May 23, 2015 in Indianapolis, Indiana. (Photo by Michael Hickey/Getty Images)
PARK CITY, UT - DECEMBER 06: John Schnatter attends the Deer Valley Celebrity Skifest held at the Silver Lake Lodge in Deer Valley on December 6, 2014 in Park City, Utah (Photo by Mark Davis/Getty Images)
PARK CITY, UT - DECEMBER 05: (L-R) Actress Eloise Broady, John Schnatter and John Paul DeJoria attend the Deer Valley Celebrity Skifest held at the Empire Lodge on December 5, 2014 in Park City, Utah (Photo by Mark Davis/Getty Images)
NEW YORK, NY - JANUARY 31: John H. Schnatter, Founder, Chairman & CEO of Papa John's International, Inc. rings the NASDAQ Opening Bell at NASDAQ MarketSite on January 31, 2014 in New York City. (Photo by Rob Kim/Getty Images)
NEW YORK - OCTOBER 29: Founder of Papa John's John Schnatter speaks onstage at the Spider-Man and Papa John's Pizza's announcement of 'Hometown Super-Heroes' in Times Square October 29, 2007 in New York City. (Photo by Bryan Bedder/Getty Images)
LOUISVILLE, KY - MAY 06: Paps John's CEO John Schnatter attends the 132nd Kentucky Derby at Churchill Downs on May 6, 2006 in Louisville, Kentucky. (Photo by Paul Hawthorne/Getty Images)
HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

The gauge then spiked to new highs in the period around May and June. And now, on the heels of the disastrous earnings report that kick-started the whole controversy and sent the stock down 8.5 percent in a single day, short interest is yet again historically elevated.

PJs short interest(Business Insider / Joe Ciolli, data from IHS Markit)

Based on how bearish traders had been getting on Papa John's shares for months, you can be sure they weren't counting on anthem protests to kill pizza sales.

So if the NFL protests aren't the reason for the struggles facing Papa John's, what is? Simon Colvin, an equity and credit markets analyst at IHS Markit, thinks that the rise of delivery apps may have something to do with it.

They've "leveled the playing field for independent operators," he told Business Insider. "These new platforms have the possibility to threaten the siloed model that the likes of Papa John’s and Domino’s have built over the years."

He notes that Domino's has also seen a "significant" pickup in short selling activity of late.

With all of this considered, combined with Pizza Hut's statement that the NFL isn't hurting its business, it appears Papa John's needs to come up with a new excuse.

More from Business Insider:

Read Full Story

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.