Earnings

Pizza Hut Is Having Some Problems in America


Pizza Hut, the country’s largest pizza chain, seems to be losing favor with American diners. The 56-year-old pizza restaurant’s same-store sales in the U.S. have fallen for seven consecutive quarters as competitors Domino’s (DPZ) and Papa John’s (PZZA) have seen sales increase.

“We’re obviously disappointed with second-quarter results and particularly with the very poor performance in our U.S. business,” David Novak, the chief executive of parent company Yum! Brands (YUM), said of Pizza Hut during an earnings call in July. “We’ve had our ebbs and flows vs. the competition over the years, and I can assure you we will be back,” Novak told investors.

Pizza Hut remains the largest pizza chain in the U.S. by far, with more than 7,800 restaurants—it continues to add more locations. But, says Darren Tristano, executive vice president at research firm Technomic, as quick-service competitors such as Papa John’s, Domino’s, and Little Caesars cut into Pizza Hut’s U.S. business, new fast-casual, made-to-order pizza concepts are also expected to steal market share.
 

Pizza Hut’s recent menu launches—such as crazy cheesy crust pizza, three cheese stuffed crust pizza, and Blake Shelton-endorsed BBQ sauce pizza—have failed to improve results.

The chain is focused heavily on China, where it is developing Pizza Hut as a more upscale casual dining restaurant rather than as a delivery and takeout joint. It now has 1,134 sit-down locations in China—where sales are increasing—and just 215 delivery shops. In the U.S., only 14 percent of Pizza Hut’s business is dine-in.

Pizza Hut spokesman Doug Terfehr says China has not been a distraction. “Both our domestic and international businesses are incredibly important to the health of our brand,” he said in an e-mail. “As we’ve matured around the world, we’ve developed dedicated resources to handle that growth without wavering on our commitments to our business here.”

Terfehr cited recent efforts, such as a dessert partnership with Hershey (HSY) that kicked off with an 8-inch cookie, the addition of equipment to all Pizza Hut restaurants to serve Wing Street chicken, and updating its website and app this spring as major turnaround efforts.

Bigger changes are on the way. Novak told investors that Pizza Hut will “launch a number of major initiatives in the United States to reignite sales beginning in the fourth quarter,” including plans to boost millennial-targeted advertising and digital marketing and a greater focus on value.

Venessa-wong-190x190
Wong is an associate editor for Bloomberg Businessweek. Follow her on Twitter @venessawwong.

Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • DPZ
    (Domino's Pizza Inc)
    • $76.58 USD
    • 0.37
    • 0.48%
  • PZZA
    (Papa John's International Inc)
    • $40.45 USD
    • 1.95
    • 4.82%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus