NEW YORK—Flat sales trends, fierce restaurant segment competition and increasing popularity of low-carbohydrate, low-fat diets likely will dampen the performance of the pizza sector in 2004.
According to The Street.com, despite positive earnings news from Louisville, Ky.-based Papa John's, the company predicts comparable-store sales will range from flat to plus-2 percent next year. Expected increases in commodity costs, said one analyst, could make sales results "erratic" for the number-three pizza chain.
Papa John's has said as much publicly, stating that transactions in the pizza segment have declined for seven consecutive quarters through August.
Additionally, sources say some health-conscious consumers are eating fewer fatty pizzas and more lower-cal alternatives. Pizza Hut addressed that nutritional trend by rolling out a low-fat pizza in October. The company has yet to say whether the product has succeeded.
One analyst is somewhat skeptical of low-fat pizza.
"People who are most concerned about their diet would not choose pizza anyway," said Michael Smith, an analyst at Kansas City, Mo.-based Fahnestock. Smith covers Papa John's, and has maintained a sell recommendation on the stock for the last 14 months.
The Street's report also cited Smith's research notes, which pointed to increasing restaurant customer sophistication as a reason casual dining restaurants are doing so well, and he believes take-and-bake operations will continue biting off bits of market share from traditional pizza chains.