Domino’s Pizza and Papa John’s shares are tumbling

Domino’s Pizza tumbled the most in more than a decade as delivery woes and softening demand caused fourth-quarter sales to fall short of Wall Street expectations and led management to cut targets for revenue growth. 

Shares of the pizza chain fell 12% Thursday, the steepest slide since 2010, while Papa John’s International Inc., which also reported soft North America sales, slumped 6%. The rout erased $1.7 billion in combined value from their market capitalizations.

Domino’s is down 46% from its pandemic peak set in late 2021, when demand from holed-up customers surged. Papa John’s shares are off 38% from their high that year. Now the focus is on soaring inflation, which is pushing more people to prepare meals at home rather than pay for delivery. 

Domino’s is also grappling with a driver shortage. Yet executives have been reluctant to tap third-party delivery options, dubbed 3PD, like GrubHub Holdings Inc. or DoorDash Inc., instead seeking to solve that dilemma within the Domino’s system.

The quarterly results and forecast are a “large step back in the company’s business model recovery and perhaps adds fodder to the bear case that 3PD has permanently altered the competitive landscape for delivery-centric pizza players for the worse,” Jon Tower, an analyst at Citigroup Inc., wrote in a note.

Andrew Charles, a Cowen analyst who rates Domino’s market perform, wrote that Thursday’s results and guidance “justify revisiting the conversation” around third-party alternatives.  

Domino’s said it’s facing “macro-economic headwinds,” particularly in its US delivery business. It reduced its two- to three-year targets for global retail sales and unit growth, and said 2023 results for these metrics will be at the bottom end of the expected ranges. 

Meanwhile, Wednesday was a brutal day for shares in Domino’s largest franchisee based on store count, Australia-based Domino’s Pizza Enterprises Ltd. It tumbled 24%, the most since 2005, following worse-than-expected first-half earnings and sales. 

Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter examining what leaders need to succeed. Sign up here.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *