Slicing up the competition
Domino’s second-quarter increase in same-store sales of 6.7 percent accelerated slightly from its 6.2-percent gain in the first quarter, when its Domino’s Dollars offer of a $5 online coupon gave way to another deal extending the chain’s $5.99 promotional price point to non-pizza items like sandwiches and chicken wings.
The chain has led its two main competitors in same-sales growth for the first half of the year.
So far in 2013, after finishing fiscal 2012 with a full-year same-store sales increase of 3 percent, Pizza Hut has reported comparable-sales decreases of 1 percent and 2 percent in the first and second quarters, respectively. The brand’s slow start could not be blamed on a lack of new-product introductions — Pizza Hut rolled out Big Pizza Sliders during February’s Super Bowl telecast and Firebaked-Style Flatbreads in mid-June, with a Crazy Cheesy Crust pizza limited-time offer and a $5.55 anniversary special offer in between.
During the second-quarter earnings call for Louisville, Ky.-based Yum! Brands Inc., Pizza Hut’s parent company, president Rick Carucci, admitted that Pizza Hut’s sales were “weak” and blamed inconsistent value messaging.
“In this environment, you win by delivering a consistent and compelling value message, and our competitors have simply done a better job in this area so far this year,” Carucci said. “We’ll have a more consistent value message going forward, and we continue to introduce new innovative products going forward, such as our flatbread pizza. We expect to deliver better sales growth at Pizza Hut for the balance of this year.”
Papa John’s Pizza is not scheduled to report second-quarter earnings until early August, but its first-quarter same-store sales gain of 1.6 percent was its smallest increase of the past four quarters.
Doyle acknowledged that Pizza Hut has been slightly negative for the year and that Papa John’s Pizza second-quarter results were unknown. However, he speculated that Domino’s market-share gains in the pizza segment this year likely would continue to come from small and regional players, which cannot keep pace with technology investments made by the national chains.
“There are some pretty special things that are going on with our brand and business right now that are causing us to grow a little faster even than our national peers,” Doyle said. “But overall, I think the basics of the thesis are intact, which is larger players are going to continue to take some share from the smaller players.”