When I first checked out Papa John's a year ago, I found an enterprise with lagging sales and a saucy valuation that seemed more like pie-in-the-sky hopefulness than sound investing. Sales were sluggish in 2004, with third-quarter domestic comps increasing only 1.2%.
But in its latest third-quarter results, domestic comps increased 3.9% year over year. What's the reason for the dramatic improvement? Product innovation.
The company has attributed a large part of its recent success to what it describes as the most significant product launch in its history. Papa John's began testing a deep-dish pizza possibility back in 2002. The customer response from its test site in Wichita, Kan., foretold good things to come; the recently released Papa's Perfect Pan Pizza has been a hit with pizza lovers across the nation.
A square-shaped pizza, rich new sauce, and Papa's first new crust in 10 years have been a recipe for success. Papa John's just released its fourth-quarter sales report, which shows domestic comps continuing to build on the momentum gained in the previous period, increasing 6.4% year over year.
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Fool contributor Jeremy MacNealy does not own shares of any companies mentioned.