Domino’s is losing the pizza wars on Wall Street
It wasn’t that long ago that Domino’s was the darling of the pizza industry. Its stock was soaring thanks to solid sales, the company’s embrace of technology and a risky but successful mea culpa ad campaign that apologized for how bad its food used to be.
But the Domino’s growth story has grown stale. Shares of Domino’s fell in early trading after the company reported revenue and profit that missed Wall Street’s forecasts and gave a new outlook that was slightly disappointing. But the stock later recovered and was up 2% by late morning.
What’s more, same-store sales in the United States, which measure how well restaurants open at least a year are doing, grew just 2.4% in the third quarter. Sales were up 6.3% in the same period a year ago.
International same-store sales cooled as well, rising 1.7% in the third quarter of this year, compared to growth of 3.3% a year earlier. Domino’s generated half of its revenue from international markets in the quarter. The company, which operates in more than 85 countries, has some 10,000 stores outside the US.
Domino’s now faces tougher competition from a resurgent Pizza Hut. The Yum! Brands owned chain has benefited from its sponsorship deal with the National Football League, which is now in its second year.
Even Papa John’s has made a comeback. The company hired Rob Lynch, formerly the president of Arby’s, to be its new CEO. Papa John’s lost its NFL deal after founder John Schnatter used a racial epithet on a conference call and also criticized NFL players for protesting the national anthem. Papa John’s has started to use the popular ex-NBA star Shaquiile O’Neal, who now serves on the company’s board, as the face of its new ad campaign.
In its earnings release, Domino’s CEO Ritch Allison acknowledged the challenges the company faces, saying that even though “it was a good quarter for Domino’s,” the company is contending with “a unique competitive environment.”
The company may also be falling behind in the fast food delivery wars too.
Domino’s continues to rely on its own drivers to get orders to people’s homes. But Pizza Hut has partnered with GrubHub while Papa John’s has a deal with DoorDash.
The competition is hurting Domino’s stock — and lifting its rivals. Shares of Domino’s are down 8% so far this year while Yum! is up nearly 25% and Papa John’s has soared more than 35%.