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Pizza Hut can't cash in on Papa John's problems

Pizza Hut doesn't seem to be benefiting from the turmoil at Papa John's.Yum Brands said in its earnin...

Posted: Aug 3, 2018 1:10 AM
Updated: Aug 3, 2018 1:10 AM

Pizza Hut doesn't seem to be benefiting from the turmoil at Papa John's.

Yum Brands said in its earnings report Thursday that a key measure of Pizza Hut's sales fell last quarter.

Fortunately for Yum Brands, its KFC and Taco Bell restaurants continue to post solid sales growth. The stock rose slightly Thursday despite broader market turmoil.

Pizza Hut has been the laggard in the Yum trinity of fast food chains for some time, because of a perception of low quality food, limited investment into technology and a dominant rival in Domino's.

It has been trying to attract customers, and there were signs of improvement recently. In the last quarter the company sped up delivery times and raised its customer satisfaction, Yum CEO Greg Creed said in the company's earnings call Thursday.

But that's not enough to make a meaningful impact on sales.

"We still believe that Pizza Hut's US turnaround will be a slow build," Creed said.

The biggest problem for Pizza Hut -- and Papa John's for that matter -- is that Domino's commands the fast pizza market. It's been on an epic tear lately and posted strong gains in sales and its stock price for the past few years.

Unlike Pizza Hut, Domino's has won over younger customers with technology.

Customers can order by sending a pizza emoji on Twitter or using Facebook's Messenger. The company has also spent heavily to improve its food -- and on marketing to reminded people how much better the pizza now tastes.

Related: Papa John's to pizza eaters -- We're listening

Creed acknowledged that Pizza Hut needs to enhance its digital operations to make the delivery process easier and faster.

He also said Pizza Hut will fine tune its ad campaign around a message of affordability.

The company's recent marketing effort featured new products, like a double cheesy crust pan pizza. But Creed said that by doing so, Pizza Hut may have lost its focus a bit and that this "weighed on same-store sales."

A key test for Yum will come in the next few months. That's when football season kicks into high gear.

Related: Is a Papa John's takeover on the menu?

Pizza Hut took over as the official pizza sponsor for the National Football League after it parted ways with Papa John' in the wake of controversial statements made by that company's former CEO, John Schnatter.

Pizza Hut is also the official sponsor for the NCAA and it just extended that deal through the 2020-2021 season.

That means Pizza Hut ads will dominate the weekend.

"The way we look at it, we'll be sort of owning football Thursday through Monday. And I think there's nothing to bring America together more than football and pizza," Creed said.

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