Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Domino’s Pizza, Inc. (DPZ), Papa John’s Int’l, Inc. (PZZA): Slow and Steady Wins the Pizza Wars

Domino’s Pizza, Inc. (NYSE:DPZ) recently reported its second quarter with a year-over-year sales increase of 10% to about $414 million and an EPS growth of 21%. It was an upbeat quarter driven by the popularity of the fairly new Handmade Pan Pizza. And the results showed that the slow and steady approach could win the pizza wars.

Pan pizza proves patience

Domino's Pizza, Inc. (NYSE:DPZ)That’s enough alliteration for a Strawberry Shortcake villain. But Domino’s Pizza, Inc. (NYSE:DPZ)’s execs made a point to repeatedly mention the successes of the Homemade Pan Pizza, which was launched in the fourth quarter but is still heavily promoted. This product now accounts for 20% of Domino’s domestic pizza sales.

A previous attempt at a pan pizza was launched in test markets to little fanfare. So Domino’s went back to the pizza stone and came up with the Handmade Pan, which uses fresh dough compared to the earlier try’s frozen dough.

Pan pizzas used to carry a close association with competitor Pizza Hut, owned by Yum! Brands, Inc. (NYSE:YUM). Pizza Hut’s sales dropped 2% in the second quarter despite the launch of a new product similar to its best-selling Cheesy Crust pizza.

What took the air out of Pizza Hut’s dough?

Pizza Hut’s slump

When Yum! reported its second quarter, a company spokesman said the slip was due to its competitors offering better deals. It’s true that Domino’s and Papa John’s Int’l, Inc. (NASDAQ:PZZA) have offered deals closer to the Hot-N-Ready bargains from Little Caesars.

But where Pizza Hut really stumbles is in the product offerings. The Hut’s rolled out new crust styles, including the cheese pocketed Crazy Cheesy Crust. But the delivery menu options remain fairly barren with standard pizzas, the calzone wannabe P’zones, wings, two pastas, and a few breads.

But Domino’s Pizza, Inc. (NYSE:DPZ) has expanded its menu in a gradual rollout that’s taken place over years.  Domino’s standard pizza offerings are joined by artisan pizzas, oven baked subs, five pasta dishes plus a customizable sixth option, and bread options that include stuffed cheesy bread with bacon and jalapeno.

There’s an old retail joke that says that Target’s the upscale Walmart. Domino’s Pizza, Inc. (NYSE:DPZ) is quickly becoming the upscale Pizza Hut — but without the related price hikes.

Comparing competitors

Papa John’s Int’l, Inc. (NASDAQ:PZZA) reported its second quarter on Tuesday and the highlights included a 9.6% revenue increase to $349.2 million. The menu at Papa John’s parallels Pizza Hut in categories, but has often been considered a higher quality. And there’s nothing that Papa likes better than special offers.

Domino’s Pizza, Inc. (NYSE:DPZ) and Papa John’s Int’l, Inc. (NASDAQ:PZZA) are similarly sized so here’s a  metric comparison:

Company Market Cap* EPS (ttm) Revenue / YoY Growth Total Number of Stores Same Store Sales Growth (US) Same Store Sales Growth (ex-US)
Domino’s 3.54 B 2.26 $414 million / 10% 10,440 6.7% 5.8%
Papa John’s 1.44 B 2.73 $349 million / 6.7% 4,252 3.4% 6.8%

Source: Yahoo Finance and company press releases *Market caps from before market on August 7.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.