Papa John's (PIZZA) need to bake up some growth in the more than 40-year-old chain.
As demand for pizza increased during COVID, the company's shares rose to an all-time high of $138.53 at the end of 2021.
Investors have since lost appetite, as management mistakes have led to poor value messaging and bland marketing, technological innovation, and loyalty programs. Its shares are down about 75% from that record high, back Yahoo Finance data.
“We got out of position on the value proposition,” Todd Penegor, who was appointed CEO of Papa John's last August, told Yahoo Finance at the ICR conference in Orlando.
The consumer was “absolutely fooled” by the $13.99 and $14.99 price points featured in the Better Get You Some campaign, which were far higher than the offers from competitors like Domino's (DPZ).
In its preliminary fourth quarter results, Papa John's same-store sales in North America fell 4% compared to a year ago. Foot traffic and ticket volume each fell by 2%.
For the full fiscal year, North American same-store sales decreased 4%, led by a 3% decrease in foot traffic and a 1% decrease in ticket size.
There is “a lot of work to do … to sort out their sales and economics for their franchisees,” BTIG analyst Peter Saleh to Yahoo Finance.
Raising the price of a menu instead of working to increase order size was a recipe for disaster, according to Saleh.
“Operators who are winning in this market, like Darden (THREE), Texas Roadhouse (TXRH), Wingtop (Wing), they take less pricing, and they drive transactions,” he said.
Penegor said the chain needs to boost awareness of its value propositions, such as Papa's pairings, which allow diners to pair a medium single-topping pizza with a side (such as wings or dessert) for $6.99.
Getting more customers through the door will give them the opportunity to trade up to more expensive items.
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“Not just value for money,” said Penegor, who was formerly the CEO from Wendy (WHITE). “It has to be worth what you paid, the whole experience.”
Penegor, who noted that the Papa John's app must be “much more seamless,” has brought in a previous Wendy's executive Kevin Vasconi to lead the charge as chief digital and technology officer.
International same-store sales growth was down less than 1% for the full financial year but up 2% in the fourth quarter, an encouraging sign for 2025, according to Wedbush analysts Nick Setyan.
Rival Domino's stock is up just 1% in the past year, but Citi analyst Jon Tower calls it “a leader in the category.”