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Papa John’s International, Inc. PZZA is riding on continued international expansion plans, strategic partnerships, strong digital platform. Also, various sales initiatives and better offers and promotions for targeting more customers have been benefitting the company. Shares of Papa John have gained 56.4% over the past year compared with the Zacks Retail - Restaurants industry’s 23.3% growth.
However, the impact of the coronavirus pandemic, continuous rise in the price of key input and a challenging sales environment remain potent headwinds.
Let’s take a look at the factors supporting growth of this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Factors Driving Growth
Regular Product Launches
Papa John’s is continuously working on maintaining uniqueness of its brand to drive growth. Innovative menus like toasted handheld Papadias and Epics Stuffed Crust continue to witness solid popularity among customers, thereby boosting the top line. Owing to the better brand positioning, the new products have driven ticket and traffic across dayparts without cannibalizing core premium products and complexing operations at other stores. During second-quarter fiscal 2021, the company launched Parmesan Crusted Papadias. Given the solid consumer acceptance with reference to the Papadias platform and Epics Stuffed Crust, the company expects the products to drive ticket and customer traffic in the second half of 2021.
The company is continually striving to eliminate barriers to expansion in existing international markets and identify new market opportunities. During the fiscal second quarter, Papa John’s opened 24 new restaurants in North America and exited 13. In international markets, the company opened 71 new restaurants and exited 27.
As of Jun 27, the company had a global restaurant count of 5,523, thereby operating in 49 countries and territories worldwide. The company expanded its partnership with Drake Food Service International to open more than 220 Papa John’s restaurants by 2025. This includes more than 170 stores across Latin America, Spain and Portugal. Also, Drake Food Service plans to open 50 new restaurants in the U.K. over the next four years.
Focus on Technology Driving Growth
Investing in technology is one of the major growth strategies of Papa John’s. The company’s online and digital marketing activities have increased significantly over the past several years in response to increasing use of online and mobile web technology. In fact, Papa John’s continues to reinforce its commitment toward providing a better customer experience with enhancements to its digital ordering process. During second-quarter fiscal 2021, the company integrated Grubhub into its system in addition to the likes of Uber Eats, Doordash and Postmates. Meanwhile, Papa John’s continues to invest in direct customer delivery. The company’s loyalty program continues to witness a rise in digital transactions during second-quarter fiscal 2021. Notably, features like early access to new products coupled with better targeting of offers and promotions as well as higher frequency and ticket have been benefitting the company.
Strong Comps Growth
Papa John’s continues to impress investors with robust comparable sales growth. The company recorded positive comparable sales growth in the second quarter of fiscal 2021, which marks the seventh straight quarter of comps growth. The company benefitted from initiatives related to menu innovation, operational efficiencies and cost-saving efforts. In the fiscal second quarter, total comparable sales rose 9% year over year compared with 22.2% growth reported in the prior-year quarter. Domestic company-owned restaurant comps in the reported quarter increased 5.6% year over year compared with 22.6% growth in the year-ago quarter.
Considering the negative impact of the pandemic on its business and the industry, the company did not provide any guidance for fiscal 2021. The Delta variant of coronavirus might hurt traffic and sales in the upcoming period.
Moreover, during the fiscal second quarter, the company witnessed high costs associated with product launch, marketing campaigns and other sales-building initiatives. The rise in commodity and other operating costs took a toll on margins.
3 Retail - Restaurants Stocks to Boost Your Portfolio
A few better-ranked stocks in the same Zacks Retail - Restaurants industry include Jack in the Box Inc. JACK, The Wendy's Company WEN and Yum! Brands, Inc. YUM, each sporting a Zacks Rank #2 (Buy).
Jack in the Box has a trailing four-quarter earnings surprise of 26.4%, on average.
Wendy's and Yum! Brands’ earnings for 2021 are expected to rise 42.1% and 22.4%, respectively.
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Papa Johns International, Inc. (PZZA) : Free Stock Analysis Report
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