Papa Johns made more management changes this week and said on Thursday that it is “working with urgency” to regain momentum as its sales and traffic worsened in the third quarter.
The pizza chain said its same-store sales fell 6% in North America last quarter, its third straight quarterly decline and the worst result for the chain since the second quarter of 2019, according to the company’s earnings report Thursday.
“We are acting with urgency,” CEO Todd Penegor said Thursday. “We are laser-focused on strengthening our foundation in the near-term, while positioning the company to capitalize on opportunities to drive success and value creation over the long-term.”
The Atlanta-based company said that “challenging sales trends” in the first half of the year persisted last quarter, “and we expect they will likely continue as we close out 2024 and enter 2025,” CFO Ravi Thanawala said on Thursday.
Sales have improved to a 4% decline, due largely to improving traffic as the chain shifted to more value late in the third quarter.
Yet the company said it is losing carryout and self-delivery business. Growth in sales from third-party delivery aggregators hasn’t been strong enough to offset those declines.
The earnings results sent Papa Johns stock down 4% on Thursday.
Papa Johns earlier this year named Penegor to replace the departed Rob Lynch. The company is already taking steps to change its management team under the former Wendy’s chief executive. On Thursday Papa Johns named Jenna Bromberg its new chief marketing officer. She previously worked with Carter’s Inc., and had spent time with Pizza Hut before that.
She joins Kevin Vasconi, who was recently hired to be chief digital and technology officer. Papa Johns also put Thanawala in charge of the company’s international business. Joe Sieve, the chief restaurant and North American development officer, will now oversee global development.
Papa Johns’ sales have slowed this year amid a difficult market for fast-food chains. Sales results across the industry have been weak amid frustration over high prices.
There is also plenty of evidence to suggest consumers shifting away from traditional pizza chains after they spent the pandemic ordering a lot of delivery. Pizza Hut’s same-store sales fell 1% last quarter. Rave Restaurant Group on Thursday said same-store sales at both its brands fell last quarter, including a 2.1% decline at its buffet concept Pizza Inn.
At the same time, Papa Johns has underperformed all of them and, by comparison, Domino’s same-store sales increased 3% last quarter.
Penegor blamed value. “Value perception is a big part of the momentum challenges we’ve seen in this business,” he said. “We need to make sure we are back in the consideration set first and foremost to be competitive on price.”
The company did shift toward more value late in the third quarter. It priced an XL New York-style pizza at $10.99. It also made its Papa Pairings value menu offering two items for $6.99 apiece permanent. Both helped the company regain some traffic, particularly for carryout, where transaction count turned positive in September and into October.
Papa Johns’ challenges have been notable since April, when the chain kicked off a new marketing plan, fueled with higher national ad fund contributions by its franchisees. The campaign, “Better Get You Some, “has traction,” Penegor said, “But we must enhance the message why consumers should choose Papa Johns and highlight our pizza craftsmanship.”
He detailed some other priorities designed to improve the chain’s long-term potential. That could include some menu simplification efforts. Penegor said the company is working on “core menu optimization to pave the way for more impactful product offerings.” New menu items resonate with customers, he said, and margins work well.
He also mentioned modernizing technology to improve efficiency, particularly through improvements with its customer relationship management platform.
Papa Johns plans to upgrade its Papa Rewards loyalty program. A quarter of its members have not yet reached a reward because thresholds to collect are too high. Penegor said the company plans to allow members to redeem points for “Papa Dough” that they can use to get pizzas or other products earlier.
That’s a “huge opportunity,” he said, because it could get customers in more often.
Penegor also said the company is working with operators to speed growth, particularly in North America. And the company is working to save some costs on buildout to encourage that growth.
But Penegor said the company needs to make sure it is producing higher-quality pizzas more often, to fulfill its reputation as a higher-quality provider.
“We got to get back to our game,” Penegor said. “How are we the best pizzas in the business? What are we doing to pave the way to make sure we don’t have a lot of rhythm brekaers in the restaurant so we can make those best pizzas? How do we bring some news from an innovation perspective and how we we continue to focus on core quality?”
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