Analyst: Papa John’s gaining momentum

LOUISVILLE Ky. Papa John’s International Inc., operator and franchisor to the nation's No. 3 pizza delivery chain, is garnering momentum from its recent ad blitz and lowered food costs, according to restaurant securities analyst Steve West at Stifel Nicolaus.

 

After a visit with management, West said in a report that Papa John’s also is looking to test a new calzone product as a new complementary offering, with a potential rollout later this year or early in 2010, if successful. No other details were available.

 

 

 

“Our outlook for the next several months is improving as [Papa John’s] U.S. franchise system has stabilized due primarily to the significant year-over-year food cost savings and management support initiatives,” West said in the report.

 

 

 

In addition, he continued, with the classic car of Papa John’s chief executive John Schnatter finally found after a major public relations campaign [3], as well as the chain’s “Papa’s in the House” TV ads still airing, sales trends are positive, outpacing some competitors.

 

 

 

Papa John’s domestic same-store sales rose 0.1 percent in the latest quarter, compared with a dip of 0.7 percent at Domino’s Pizza. Pizza Hut, the largest pizza chain, saw an 8-percent drop in same-store sales in its latest quarter, according to brand parent Yum! Brands Inc.

 

 

 

West added that Papa John’s intended to continue a focus on online ordering sales, which garner a 10-percent higher average ticket than typical phone orders. Currently, Papa John’s online sales account for 25 percent of total sales, and the chain wants to increase that to a 40-percent mix.

 

 

 

West rates Papa John’s stock a Hold, and parent company Stifel, Nicolaus & Co. expects to receive or intends to seek compensation for investment banking services from Papa John’s in the next three months. The investment bank also makes a market in the pizza company’s stock.

 

 

 

Contact Sarah E. Lockyer at [email protected] [4].