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Pizza Hut's New Weapon

By Steven Mallas – Updated Nov 16, 2016 at 2:15PM

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Yum! Brands' Pizza Hut introduces a new product to keep sales up as the pie wars continue.

What's the secret to propping up same-store sales at Pizza Hut, a part of the restaurant portfolio of Yum! Brands (NYSE:YUM)? Would you believe cheese? Of course you would, because when has it ever not been cheese?

Well, maybe it isn't cheese all the time; sometimes it's the size that matters. But for right now, it is indeed the stuff that rats crave; maybe that should be the Hut's next slogan: "We give you more of the stuff that rats crave." Nah, didn't think so.

Anyway, Yum! Brands issued a press release talking about the 10th anniversary of the company's stuffed-crust pizza product, as well a brand new related offering -- 3Cheese Stuffed Crust Pizza. Sounds pretty delicious; I have to admit, I have a soft spot for the stuff that rats crave. As such, I think it'll put a fresh spin on the culinary model, and I believe it should propel some tasty sales for Pizza Hut.

The Hut is engaged in a fierce pie war with the likes of Domino's Pizza (NYSE:DPZ), Papa John's (NASDAQ:PZZA), and all manner of local parlors. Coming up with new versions of pizza pies is what these companies were born to do, and all of them are obligated to find out which version will serve the consumer -- and thus brand equity -- the best. And when I said "war," I meant it. Take a look at Mike Cianciolo's article covering Papa John's and its sneaky trick regarding the integrated sponsorship of NBC's The Apprentice program by competitor Domino's. It's getting ugly out there.

Pizza Hut has been off and on over the past few years in terms of same-store sales appreciation. According to the Yum! Brands investors site, comp growth for Pizza Hut locations in the United States for all of 2004 was 5%; it was 1% in 2003 and 0% in 2002. Things are obviously improving, so perhaps the 3Cheese strategy will pull some traffic into the Hut.

There is a more interesting angle to the Yum! story: China.

Think that's a stretch? It isn't. Growth is happening there. Read W.D. Crotty's very interesting work on this aspect of the company. Better yet, order up either a pizza, a taco, or a bucket of greasy chicken to serve as a "food-track" to go along with the piece.

More Takes on Yum! Brands:

Fool contributor Steven Mallas owns none of the companies mentioned. He also thinks the most delicious looking pizza he's ever seen was the one delivered to Spicoli in "Fast Times At Ridgemont High."

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Stocks Mentioned

Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
YUM
$110.65 (-0.13%) $0.14
Papa John's International, Inc. Stock Quote
Papa John's International, Inc.
PZZA
$75.15 (1.39%) $1.03
Domino's Pizza, Inc. Stock Quote
Domino's Pizza, Inc.
DPZ
$330.00 (3.08%) $9.86

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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