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

Domino’s Pizza tumbled probably the most in additional than a decade as supply woes and softening demand triggered fourth-quarter gross sales to fall wanting Wall Avenue expectations and led administration to chop targets for income progress. 

Shares of the pizza chain fell 12% Thursday, the steepest slide since 2010, whereas Papa John’s Worldwide Inc., which additionally reported smooth North America gross sales, slumped 6%. The rout erased $1.7 billion in mixed worth from their market capitalizations.

Domino’s is down 46% from its pandemic peak set in late 2021, when demand from holed-up prospects surged. Papa John’s shares are off 38% from their excessive that yr. Now the main focus is on hovering inflation, which is pushing extra individuals to organize meals at dwelling reasonably than pay for supply. 

Domino’s can also be grappling with a driver scarcity. But executives have been reluctant to faucet third-party supply choices, dubbed 3PD, like GrubHub Holdings Inc. or DoorDash Inc., as an alternative searching for to resolve that dilemma throughout the Domino’s system.

The quarterly outcomes and forecast are a “giant step again within the firm’s enterprise mannequin restoration and maybe provides fodder to the bear case that 3PD has completely altered the aggressive panorama for delivery-centric pizza gamers for the more serious,” Jon Tower, an analyst at Citigroup Inc., wrote in a observe.

Andrew Charles, a Cowen analyst who charges Domino’s market carry out, wrote that Thursday’s outcomes and steering “justify revisiting the dialog” round third-party options.  

Domino’s mentioned it’s going through “macro-economic headwinds,” notably in its US supply enterprise. It decreased its two- to three-year targets for world retail gross sales and unit progress, and mentioned 2023 outcomes for these metrics will likely be on the backside finish of the anticipated ranges. 

In the meantime, Wednesday was a brutal day for shares in Domino’s largest franchisee based mostly on retailer rely, Australia-based Domino’s Pizza Enterprises Ltd. It tumbled 24%, probably the most since 2005, following worse-than-expected first-half earnings and gross sales. 

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