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The Papa John's Disaster Could Be Domino's and Pizza Hut's Gain

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Papa John’s (PZZA - Free Report) sales are suffering after the ex-CEO of the company, John Schnatter, was publicly denounced for using racist language. Considering this, Domino’s Pizza’s (DPZ - Free Report) stance in the pizza industry remains hopeful.

With Papa John’s customers turning their backs from their once-favorite pizza store, other pizza stores are left to catch their hearts. Even though Papa John’s made it quite clear that it will move away from John Schnatter after the PR fiasco, its sales numbers show that his effect will linger longer than the company might hope.

Papa John’s said its expected sales at stores that were open at least a year are expected to drop between 7 and 10 percent this year. Since the fourth quarter of 2017, Papa John’s has been reporting negative same-store sales growth.

But bad news for Papa John’s is good news for other pizza giants, like Yum's (YUM - Free Report) Pizza Hut and Domino’s Pizza. In the pizza market, a piece of the Papa John's pie is left for anyone—most likely Pizza Hut and Domino’s—to catch.

Domino’s has become one of the world’s largest fast-food chains, with more than 14,800 stores in over 85 countries. It has become an international powerhouse. Additionally, Domino’s boasts a solid loyalty program and higher sales from its innovative digital ordering platform.

Over the past couple years, Domino’s has successfully surpassed Pizza Hut in taking the majority of the quick-service pizza industry’s market share. An analyst at Baird expects Domino’s third-quarter same-store sales to jump if such blunder at Papa John’s continues.

Even though Pizza Hut’s same-store sales and industry market share haven’t been as impressive as those of Domino’s, with its potential partnership with the National Football League, it can still turn things around in favor of its business. Though Pizza Hut has been a drag for Yum by being the slowest sales grower of Yum Brands, Pizza Hut is still worth taking note of, depending on how the sponsorship with the NFL goes.

No matter how much Papa John’s tries to re-brand itself to shutter against the dark shadows of Schnatter, it seems as if that will be a difficult task in the near future. Although the question of who will take the former Papa John’s customers still remains, as of now, Domino’s remains as the top in the pizza food chain, and Pizza Hut as a new opportunity.

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