Papa John’s says it can feed a family of four for under $7 per person

Papa John’s International Inc. addressed customer inflation concerns during its first-quarter earnings call, noting that it offers an affordable family meal at a time when budgets are falling short.

“At Pope John’s you can feed a family of four with a delicious premium meal, a pizza and a side dish for less than $ 7 per person,” CEO Rob Lynch said in a call Thursday, according to a FactSet transcript. .

Analysts have spoken out on the issue, saying pizza is the cheapest way for a family to dine out. (Eating at home is less expensive.)

I’ll see: Analysts say this is the least expensive restaurant option to feed a family of four

However, inflation does not save the pizza industry, with Pope John’s PZZA
raise prices to cover the higher cost of ingredients.

“Last quarter we were able to successfully raise prices by about 7% on average in our corporate stores to offset inflation in our food basket,” he said.

“This helped increase the ticket, as well as the benefits of the continued blend of premium innovation like New York Style Crust. Although higher prices marginally affected transactions last quarter, we will continue to pursue a balanced, weighted approach. short-term margin optimization with significant customer base retention and the momentum we’ve created over the past two years, which is key to our brand. long-term success. “

In addition to New York Style Crust, Pope John’s launched a limited-time Epic Pepperoni Stuffed-Crust pizza. Lynch points out that pepperoni is the chain’s most popular cover.

“We believe that the last two product launches, the $ 13 New York-style pizza and the $ 14 Epic Pepperoni, have been top-priced products, so there’s little evidence that consumers want lower the value, “Stifel analysts wrote.

“The company has used its loyalty program to target consumers with value propositions, so price-sensitive consumers have affordable options. We hope the company continues to introduce new products to drive sales profits. same restaurant “.

Stifel values ​​buying Pope John’s shares and lowering its target price to $ 130 from $ 145.

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Like other pizza chains, Pope John’s also faces staffing issues. The company has invested, and says it will continue to invest, in technologies and other solutions to help. But Lynch said finding enough delivery drivers in particular has been a challenge for more than a year. And the situation was more pressured by omicron.

“Do we think our compositions could be even higher if we had more staff? Absolutely,” Lynch said.

But he made comparisons with unnamed competitors to demonstrate Pope John’s strongest position.

“Our premium positioning is a different model from people who say staffing is a challenge,” he said.

“[T]The challenges of inherited staff are exacerbated because their model has a lower price, more transactions. We have a higher price. We don’t need so many transactions, so we’re less affected by the staffing challenges we’re seeing. “

Domino’s Pizza DPZ,
+ 0.03%
has talked about how staffing issues are affecting their sales.

I: Domino’s wants more customers to receive their own pizzas instead of waiting for delivery

I Yum Brands Inc. YUM,
which is the parent company of Pizza Hut, said it was affected by staff shortages.

“While consumer demand remained strong, smooth sales in the quarter came from our delivery channel, where capacity constraints limited our ability to meet demand,” the CEO said on Wednesday. of Yum, David Gibbs, in the first quarter earnings call, according to FactSet.

“This was motivated by staff challenges, mainly by the shortage of delivery drivers, which have been felt throughout the industry.

Yum reported a profit error. Sales at Pizza Hut’s same restaurant hit a quarter-high point with sales in the United States falling 6%.

“Similar to what we heard from Domino’s, Pizza Hut’s delivery business in the U.S. weakened during the quarter, as a result of the shortage of delivery drivers,” BTIG wrote in a Yum note.

“Our conversation with other restaurant operators suggests that third-party delivery aggregators using a subscription service may be gaining an advantage over the traditional delivery model. That said, Pizza Hut US said yes
consider / test partnerships with aggregators to provide more access
drivers like Pope John’s. “

BTIG values ​​Yum shares neutral.

“It’s not hard to see that both Domino’s USA and Pizza Hut USA generated negative sales in the same stores in the first quarter (-3.6% and -6%, respectively), with both concepts calling for staffing issues. to delivery drivers, “he wrote. Mark Kalinowski in a note from Pope John to Kalinowski Equity Research.

“The success of Pope John’s Q1 lap with an even harder comparison than either of those two rivals is a good argument for Domino’s US to start using third-party delivery in a meaningful way.”

Kalinowski values ​​buying Pope John’s shares at a target price of $ 115.

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Pope John’s reported first-quarter earnings that surpassed the street.

“We believe that Pope John’s strategic and operational approach to his menu and marketing approaches, partnerships with aggregators and franchisees, growth and capital movements are prudent and supportive of his model of moving forward.” wrote MKM Partners in a note.

MKM values ​​shares of Pope John’s Neutral with a fair value estimate of $ 108, below $ 112.

Shares of Pope John’s have fallen 34.7% during the year so far. Domino’s is down 39.7%. And Yum Brands shares have fallen 17.1% by 2022 so far. Yum Brands is also the parent company of Taco Bell and KFC.

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