Papa John's Loss Is Krispy Kreme's Gain
This month, we got the news that Anthony Thompson would be leaving his post as president and chief operating officer of Papa John's International to become the new president and CEO of Krispy Kreme Doughnuts . He had been with Papa John's since 2006 and has more than 25 years of experience in the food and beverage industry. For investors, what does this mean for Papa John's and Krispy Kreme?
Why the move?
In all likelihood, Thompson is taking the job because he wants to be a CEO. At Papa John's, Founder John Schnatter does not look to be going anywhere or retiring any time soon. Matter of fact, after Thompson left the company, Schnatter added the role of president to his title. He is now founder, chairman, president, and chief executive officer of the company. He did not, however, take the role of chief operating officer. For that role, he promoted Steve Ritchie from senior vice president to chief operating officer.
For Krispy Kreme, Executive Chairman James Morgan will continue to work for the company full time. So investors benefit with Thompson joining the company and Morgan continuing to help oversee strategy while mentoring Thompson. This works out well because Morgan is 66 years old, while Anthony Thompson is only 47.
What's on the plate at Krispy Kreme?
Krispy Kreme remains focused on new doughnut flavors and international expansion. Krispy Kreme just finished its promotion for Krispy Kreme Key Lime Pie and Caramel Dutch Apple Pie Doughnuts. Krispy Kreme's latest promotion is for Birthday Cake Batter and Brownie Batter Doughnuts. Krispy Kreme describes the Birthday Cake Batter Doughnut as "a blend of Kreme and birthday cake batter filling in a yeast shell, topped with yellow icing and bright confetti sprinkles." The Brownie Cake Batter Doughnut consists of a "chocolate yeast shell with a rich brownie batter filling, topped with chocolate icing and mini chocolate chips."
Krispy Kreme also succeeded in opening its 600th international location on May 17. Krispy Kreme opened the location in Carolina, Puerto Rico with its local franchise partner, Caribbean Glaze. The two have been operating in Puerto Rico since 2008. Krispy Kreme can now be found in more than 20 countries in North America, Latin America, Asia, Europe, and the Middle East.
What's Papa John's up to?
Papa John's posted a 9.6% gain in comparable sales for its North American operations in the first quarter. The company's Double Cheeseburger Pizza promotion and having Peyton Manning as a spokesperson contributed to this performance. Papa John's also benefited from being the official sponsor of the NFL during Manning's record-breaking season. The Double Cheeseburger promotion was particularly successful for the company in that it was at the higher price point of $12. This proved that the company can offer higher priced items, and its customers are willing to pay for a premium product.
Papa John's newest promotion involves Indiana Pacers forward Paul George. He is promoting Papa John's new Sweet Chili Chicken Pizza. This pizza features pineapple, onions, red peppers, and breaded white meat chicken with a sweet chili sauce instead of pizza sauce. The Sweet Chili Chicken Pizza costs $12, the same price as the Double Cheeseburger Pizza.
How the new CEO could help Krispy Kreme
One area where Papa John's excels is with online ordering. Here, Anthony Thompson was instrumental in helping make Papa John's a digital leader. Krispy Kreme can use some of his expertise since the company has lacked a digital strategy for the longest time. This month, Krispy Kreme hired VML to help map out its digital strategy.
How do shares compare?
1 Year Return
Foolish final thoughts
I think Thompson is a talented executive, and it's great news for Krispy Kreme shareholders that he's the company's new CEO. Papa John's is still in great shape, but I wonder if Papa John himself is wearing too many hats. He needs to let go of some of the reins and start grooming a successor.
For investors, I think Krispy Kreme is the better bet right now. It's got a new CEO, and its price-to-earnings-to-growth ratio is less than 1, which signifies that the company may be undervalued based on its growth prospects. I see Krispy Kreme shares continuing to outperform the market going forward.
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The article Papa John's Loss Is Krispy Kreme's Gain originally appeared on Fool.com.Mark Yagalla has no position in any stocks mentioned. The Motley Fool owns shares of Papa John's International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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