Papa John’s (ticker: PZZA) stock has taken a beating in 2018 amid slumping sales and management drama related to the resignation of former CEO John Schnatter. But while Papa John’s struggles to right the ship, analysts say Domino’s Pizza, Inc. (DPZ) is well-positioned to siphon off more of Papa John’s business.
In the second quarter, Papa John’s reported a 6.1 percent decline in same-restaurant sales. With Domino’s reporting a 6.9 percent increase in domestic same-restaurant sales and a 4 percent increase in international same-restaurant sales in the same quarter, it’s clear Domino’s is taking a bite out of Papa John’s business.
Fortunately for Domino’s investors, analysts say the window of opportunity will likely remain open for at least the rest of 2018. Papa John’s guidance implies same-store sales will decline between 8.5 and 14.5 percent in the third and fourth quarters.
“In our opinion, this dynamic creates a visible opportunity for Domino’s and other leading brands in the industry to gain additional market share when looking on a short-term and longer-term basis,” Baird analyst David Tarantino says.
Tarantino says Domino’s third-quarter same-store sales growth could gain an additional 0.8 percent to 1.4 percent from Papa John’s sales losses alone.
Schnatter stepped down from the CEO position in July after admitting to using a racial slur on a conference call. But Schnatter is suing Papa John’s and has taken every opportunity to publicly bash the current management team since his departure. Schnatter also remains on the company’s board of directors.
Bank of America analyst Gregory Francfort says Papa John’s was already facing an uphill battle competing against Domino’s pricing advantages.
“Domino’s made a decision eight years ago to invest in pizza quality and hit aggressive price points that competitors are now having a difficult time matching,” Francfort says.
He says Domino’s loyalty program and its focus on technology should continue to help win over business.
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!