Domino’s Is Still The Pizza Leader Despite Missing Earnings

According to food service industry consultants Technomic, Domino’s remains the leader in the market for quick-service pizza even though the performance of the company’s shares was the worst in over a year following disappointing earnings. But the company is winning the pizza battles despite the market rivalry.

Following Domino’s, the second in the market is Pizza Hut, privately held Little Caesars in third and Papa John’s in fourth, according to the report. .

The scandals involving the founder of Papa John’s, John Schnatter, has had an impact in the sale of the pizza chain even as the company strives to gain back its lost customers and is the only major pizza chain that is yet to announce fourth quarter results. According to analyst Mark Kalinowski, a comeback for the company to its former glory seems years away despite a large investment injected into the company recently by activist hedge fund Starboard Value.

Over the past year, there has been a drop of 27 per cent in the share value of the company and now has a market capitalization of $1.3 billion. The stock was downgraded last week by Stifel’s Chris O’Cull who noted that Papa John’s promotions suggest that it is struggling to keep up with others’ deals.

During its fourth quarter, analysts expect Papa John’s to earn 17 cents per share according to Refinitiv estimates, which was lower by 67.8 per cent compared to the same period a year ago. According to estimates of Wall Street, same-store sales would drop by 7.4 per cent.

In contrast, there was a 1 per cent increase in sales at U.S. stores open at least a year during its fourth quarter for Pizza Hut, which is the laggard of Yum Brands. The stronger brands of Yum with a market value of $28.5 billion has helped in the growth of the company and there has been an almost 16 per cent rise in the stocks of the firm in the last one year.

“For both the U.S. and international business, sustainable improvements in sales growth will remain a slow build as we update and reposition the asset base and make the messaging more distinctive,” Yum Brands CEO Greg Creed told analysts on the conference call.

The chain will continue to lose market share in 2019, suspects Kalinowski.

That trend is however being bucked by Domino’s. Market share is still being gained by the market leader and has outpaced the industry average in terms of same-store sales numbers.

During the fourth quarter, a growth rate of 6.5 per cent was reported for U.S. same-store sale was reported by Pizza Hut. The number while beating the market average,  was lower than the expectations of the market which expected 6.9 per cent growth. The same-store sales in the prior period was hit by a calendar change that pushed New Year’s Eve sales to the current quarter and its expansion strategy.

“While disappointed with the results, we note that Domino’s has experienced similar slowdowns in the past (a year ago, as noted) and has managed to reaccelerate comps through various means (new technology, menu items, clever advertising) and this quarter doesn’t change that view,” BTIG analyst Peter Saleh wrote in a research note.

(Adapted from CNBC.com)

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Categories: Creativity, Economy & Finance, Strategy, Sustainability, Uncategorized

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