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Papa John's Partners With DoorDash, Strengthens Delivery

Zacks Equity Research

Shares of Papa John’s International, Inc. PZZA rallied more than 2% at close on Mar 13, following the company’s announcement of a national partnership with the fastest-growing door-to-door delivery service provider, DoorDash. Notably, DoorDash is currently in collaboration with more than 1,400 restaurants in the United States including Dunkin’ Brands DNKN.

The move is clearly an effort by Papa John’s to revive its long-standing declining sales trend and to reach out to more customers and drive incremental traffic. Unlike other pizza chains, Papa John’s has been under a negative light for quite a long time owing to the denouncement of its ex-CEO on grounds of racial slur.

A look at Papa John’s price trend reveals that the stock has had an unimpressive run on the bourses in the past year. Shares of the company have lost 21.6% against the industry’s collective growth of 13.2%. This underperformance can be primarily attributed to a sharp fall in the company’s bottom line over the last few quarters.

 

Focus on Strengthening Delivery Services

Papa John’s partnership with DoorDash is in line with the company’s efforts to boost off-premise sales. More than 60% of the pizza chains’ orders come from online platforms. The company’s online and digital marketing activities have increased significantly over the past several years in response to increasing use of online and mobile web technology.

In fact, Papa John’s continues to reinforce its commitment toward providing a better customer experience with enhancements to its digital ordering process. Of late, the company expanded its digital ordering capabilities further with the launch of Facebook Instant Ordering and in turn became the first national pizza chain to do so. It is also the foremost national restaurant chain to launch a custom ordering app for Apple TV and commence a nationwide digital rewards program.

Our Take

We believe that with the addition of DoorDash, the pizza chain stands a chance to revive its sales. In 2018, the company’s total revenues declined 11.8% year over year. In the fourth quarter of 2018, global restaurant sales decreased 13% comparing with the third quarter's decline of 6.6%. Notably, the company witnessed growth of 9.9%in the year-ago quarter.

Further, the move will enable Papa John’s to fend off intense competition from the likes of Domino’s DPZ and Yum! Brands YUM.

Papa John’s currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Dunkin' Brands Group, Inc. (DNKN) : Free Stock Analysis Report
 
Papa John's International, Inc. (PZZA) : Free Stock Analysis Report
 
Yum! Brands, Inc. (YUM) : Free Stock Analysis Report
 
Domino's Pizza Inc (DPZ) : Free Stock Analysis Report
 
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