Having declined 4% in the last year, Papa John’s Int’l, Inc. (NASDAQ:PZZA) offers good value for money based on its financial outlook.
The pizza delivery business is investing in a refreshed brand strategy, improving its differentiation through staff training and enhancing its competitive position via its increasing use of new technology.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Refreshed brand strategy” data-reactid=”32″>Refreshed brand strategy
Papa John’s is currently testing a range of value menu items that could provide a wider range of price points for consumers. It is seeking to combine its premium specialty pizzas alongside lower price points in order to increase the size of its total addressable market. This could broaden its appeal to new customer demographics and boost its sales growth.
The company’s new products form part of a wider brand relaunch that includes increased investment in its brand initiatives. The strategic investment made by Starboard in February provided a $40 million boost to its marketing budget that could strengthen its competitive position.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Digital investment” data-reactid=”35″>Digital investment
The business is investing in new technology in order to improve the customer experience. For example, its partnership with Drivosity has led to a doubling in the number of Papa John’s restaurants that offer GPS-enabled delivery tracking. In addition, the company is expanding its brand reach through initiatives such as voice ordering on Alexa and a relaunched loyalty program that provides greater personalization for its customers.
The company is implementing enhanced analytics across all of its store and customer data. This provides it with greater opportunities to provide recommendations to its customers in order to boost its sales growth. It is investing in an upgraded mobile app that will provide a faster and simpler checkout process, while it is increasing convenience for its customers through its provision of Apple (NASDAQ:AAPL) TV and Facebook (NASDAQ:FB) ordering.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Investing in staff members” data-reactid=”38″>Investing in staff members
Papa John’s is investing in staff training in order to increase its differentiation versus sector peers. For example, it offers a benefit program that covers 100% of tuition costs of undergraduate and graduate online degree programs for its team members. This could improve the morale of its staff and boost its customer service levels.
Additionally, it has appointed a Chief People Officer to improve the experience of its staff members. This could lead to a higher staff retention rate that reduces the company’s costs over the long run.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Potential threats” data-reactid=”41″>Potential threats
The company’s recent performance in North America has been disappointing. In its second quarter, the business reported a fall in its comparative sales of 5.7% versus the same period of the previous year. Its near-term outlook could be challenging due to weak consumer sentiment as price rises from tariffs on Chinese imports squeeze consumer disposable income. Since Papa John’s products are discretionary, this may lead to its customers cutting back on their spending at the business over the short run in favor of cheaper alternatives.
Papa John’s recent international performance has been stronger than its North American sales figures. Its international locations recorded a rise in comparative sales of 0.3% in the second quarter.
It has the scope to expand internationally, with the company forecasting a net increase in its international store numbers of 140-250 per year over the medium term. Its major competitors have over 9,000 international units each, while Papa John’s opened its 2,000th international restaurant in April 2019. This could diversify its operations and increase its exposure to fast-growing markets outside of North America.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Outlook” data-reactid=”45″>Outlook
Analysts forecast that Papa John’s will record a rise in its earnings per share of 35% in fiscal 2020. Its forward price-earnings ratio of 46 suggests that it offers long-term investment appeal.
Disclosure: The author has no position in any stocks mentioned.
Read more here:
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This article first appeared on GuruFocus.
” data-reactid=”55″>This article first appeared on GuruFocus.
Add Comment