Pizza Hut is 'hemorrhaging' customers to Papa John's and Domino's (YUM)

pulse

February 10, 2017 3:25 PM

Pizza Hut is bleeding customers, as other pizza chains eat into the brand's marketshare.

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Pizza Hut is bleeding customers.

The pizza chain's same-store sales fell 4% in the US last quarter, parent company Yum reported on Thursday.

"The quarter's results disappointed, and are not acceptable," Greg Creed, Yum's CEO, said regarding Pizza Hut's domestic sales in a call with analysts on Thursday.

Pizza Hut is planning to rebuild sales by improving its digital experience, speeding up delivery times, and simplifying its point-of-sales system, Creed said.

However, analysts argue that more work needs to be done to make the chain competitive with pizza industry rivals.

Pizza Hut is continuing to "hemorrhage market share to more focused pizza-sector rivals," Nomura analyst Mark Kalinowski wrote in a research note Thursday evening.

Pizza chains such as Papa John's and Domino's have steadily eaten into Pizza Hut's sales over the last two decades.

In 1995, Pizza Hut had 25% of the fast food pizza market, compared to Domino's 11% and Papa John's 2.2%. In 2015, Pizza Hut had just 14.5% of the market, while Domino's grew to 12.4% and Papa John's grew to 7.4%.

Kalinowski believes that one solution that could fix Pizza Hut's downward spiral would be for Yum to divest from the chain, spinning off Pizza Hut as a single-brand company.

"Given the long-term (over 20-year) track record of Pizza Hut not being on a better path under YUM's ownership, we have low confidence in current plans to revive the brand," Kalinowski wrote.

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