Papa John's has been having a rough go of it lately. The pizza giant - once the undisputed king of delivery in many neighborhoods - is finding itself in an increasingly crowded market where everyone seems to be upping their game.
Domino's and Pizza Hut haven't been sitting still. They've revamped their digital ordering systems (Domino's app is actually pretty slick now) and rolled out some aggressive promotions that are eating into Papa John's market share. The stock has been bouncing around like a pizza dough ball as a result, with each earnings report bringing fresh volatility.
The company isn't taking this lying down, though. They've been experimenting with menu innovations - their new Detroit-style pizza is actually pretty good, I tried it last week - and they're making a serious push internationally. Word is they're targeting markets in Southeast Asia where pizza consumption is growing fast.
But there are some real challenges ahead. One analyst I spoke with pointed out that "ingredient costs are through the roof right now," and finding workers remains difficult despite wage increases. These pressures are squeezing margins at a time when the company can least afford it.
"The next two quarters will be critical," said Maria Sanchez, food industry analyst at Morgan Stanley. "They need to show they can grow same-store sales despite the competitive environment."
From where I sit, Papa John's has a decent shot at turning things around - their brand still has strong recognition, and their loyalty program has some devoted followers. But they're going to need to execute flawlessly in a market that's showing no signs of getting easier.
The big question for investors: is the current stock price already reflecting these challenges, or is there more downside ahead? I think it could go either way - which probably isn't the definitive answer you're looking for, but that's the honest assessment of the situation.
