Pizza stocks Domino's Pizza (NYSE:DPZ) and Papa John's International Inc (NASDAQ:PZZA) were on the slide in Thursday’s early deals as weaker-than-expected financials revealed tough conditions for fast-food operators.
Domino’s fell farthest losing US$38.17, or 11% down, to US$310.29 a share, whilst Papa Johns's stock gave up US$5.95, or 6.44%, to US$86.39.
Undershooting market consensus Domino’s reported US$1.39 billion of revenue for the three months to the end of December, versus US$1.44 billion, which nevertheless saw adjusted earnings of US$3.97, slightly better than the predicted US$3.94.
Same-store metric, however, spooked investors as sales grew by a meagre 0.9% whilst Wall Street analysts had forecast 3.4% growth. At the same time company told investors it was downgrading sales growth forecasts for the next to three year down to between 4% to 8% from its previous range of 6% to 10%.
Chief executive Russell Weiner took a somewhat novel and optimistic tack in his accompanying comments, telling investors: “We pride ourselves on being a work-in-progress brand and there is no better way to describe this period in our history.
“The Domino’s system has a lot to be proud of while also having opportunities to address.”
Weiner added: “We experienced significant pressure on our US delivery business in 2022 and focused our efforts on creating solutions.
“We also drove continued momentum in our US carryout business and achieved strong international store growth. Over half of our orders in the US now come through the carryout channel, and we are #1 in both the delivery and carryout QSR pizza segments.”
Papa John’s, meanwhile, reported US$526.2 million of revenue leading to $0.71 of adjusted earnings per share, up compared to market predictions pitched at $0.66.
It said it expects North American sales to grow by 2% and 4% per year, though the outlook for 2023 would be at the low end of that range.
“Our performance demonstrates the resiliency of our brand, the agility of our teams and the strength of our business model despite the macro headwinds we faced,” Papa John’s chief executive Rob Lynch said in its statement.
“We will continue to grow on top of the solid foundation we have built over the past three years as we deliver on our strategic priorities and build the world’s best pizza company.”
He added: “Investments in product and digital innovation, combined with strong operational excellence, will continue to enhance the customer experience and contribute to healthy North America comparable sales and unit economics.”