Papa John’s (Pizza) must stimulate the growth of the more than 40-year-old chain.
As demand for pizza increased during COVID, the company’s stock jumped to a record high of $138.53 at the end of 2021.
Investors have since lost appetite as management missteps have led to poor value messaging and weak marketing, technology innovation and loyalty programs. Its shares are down roughly 75% from that record high, according to the data Yahoo Finance data.
“We got out of position in terms of the value proposition,” Todd Penegor, who was named CEO of Papa John’s last August, told Yahoo Finance at the ICR conference in Orlando.
The consumer was “absolutely gravitated” to the $13.99 and $14.99 prices featured in the Better Get You Some campaign, which were far more than the offers from competitors as Domino (DPZ).
In preliminary fourth-quarter results, Papa John’s same-store sales in North America fell 4% from a year earlier. Foot traffic and ticket sizes each fell by 2%.
For the full fiscal year, same-store sales in North America fell 4%, led by a 3% decline in traffic and a 1% decline in ticket size.
There is “a lot of work to be done … to get their sales and the economics for franchisees back on track,” a BTIG analyst said Peter Saleh he told Yahoo Finance.
Raising the price of the menu instead of working to increase the order size was a recipe for disaster, according to Saleh.
“Operators who are winning in this market, like Darden (DRI), Texas Roadhouse (TXRH), Wingstop (WING), charge lower prices and encourage transactions,” he said.
Penegor said the chain needs to raise awareness of its value offerings, such as Papa pairings, which allow patrons to pair a medium pizza with one topping with a side (such as wings or dessert) for $6.99.
Increasing the number of customers will give them the opportunity to trade up to more expensive items.
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“It’s not just value for money,” said Penegor, who was former chief executive officer from Wendy’s (WEN). “The whole experience has to be worth what you paid for it.”
Penegor, who noted that Papa John’s app needed to be “a lot more seamless,” brought in the former Wendy’s CEO Kevin Vasconi lead the charge as Chief Digital and Technology Officer.
International same-store sales growth fell less than 1% for the full fiscal year but rose 2% in the fourth quarter, an encouraging sign for 2025, according to analyst Wedbush Nick Setyan.
Shares of rival Domino’s have risen just 1% in the past year, but analyst Citi Ion tower calls “category-leading”.
