March 18, 2008 / 3:27 PM / 10 years ago

Papa John's says pizza sector pressured

CHICAGO (Reuters) - The pizza industry is under more pressure than it was at the beginning of the year, the chief executive of Papa John’s International Inc (PZZA.O) said on Tuesday, as commodity costs rise and consumers worry about the economy and the cost of gasoline.

“I personally think we are in a recession,” CEO Nigel Travis said during the Reuters Food Summit in Chicago. Consumers are increasingly concerned about the economy, he added.

In February, the world’s third-largest pizza company reported lower fourth-quarter profit as rising commodity prices fueled losses at its franchisee-owned cheese purchasing operation. Revenue and same-store sales increased about 2 percent for the period.

Despite the year-end rise in sales, the company did not increase its forecast for 2008 domestic same-store sales growth of 1.25 percent to 2.75 percent.

“In a normal year, given our performance in Q4 and the start of the year, we would have increased guidance,” said Travis, who added that the business climate has been anything but normal.

“This is an environment where things change weekly, not quarterly,” he said. “We feel very firm that we should stick with our current guidance.”

Fast-food chains like McDonald’s Corp (MCD.N) have increased their business by offering low-priced menus, and Papa John’s rivals have adjusted to the economy by making similar moves.

    Yum Brands Inc’s (YUM.N) Pizza Hut has found a niche in the market with its value-priced Pizza Mia product, and Domino’s Pizza (DPZ.N) has said it plans to roll out a value menu to appeal to cash-strapped consumers.

    Travis said Papa John‘s, which is planning to roll out new specialty pizzas, had no intention of lowering prices by using fewer expensive ingredients or making pizzas smaller.

    While the Louisville, Kentucky-based company won’t be competing with rivals’ value-priced pizzas, Travis said the competitive landscape was changing as people eat more meals at home and as grocers stock their shelves with a multitude of frozen pizzas.

    (For summit blog:

    Reporting by Brad Dorfman, editing by Lisa Von Ahn

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