Domino's Pizza Group PLC (LSE:DOM) shares fell Friday, singed in part by a scathing note from analysts at Liberum.
The firm issued a ‘sell’ rating and price target of 230p, some way below the 287.8p at which the shares closes the previous day.
“There are three key reasons to have concerns on the outlook for Domino’s Pizza,” analysts said, pointing to competition with bakery chain Greggs, declining customer repurchase rates in Europe and overly bullish guidance.
“We view Greggs as a clear and present danger,” analysts said. “...The group has embarked on a major pivot away from the traditional bakery model to the value leading play in the food-to-market.”
That notable includes investing in pizza and chicken, which directly competes with Domino’s, especially as Greggs moves forward with new store openings.
Meanwhile, higher menu pricing is hurting customer repurchase rates, which in turn has Liberum doubting the consensus guidance for fiscal 2023 and 2024.
“We know the group has missed its store openings in FY22, but surely this too in FY23 and beyond requires downward revision and ask if a cost-cutting exercise is required,” analysts said. “...Too much risk on earnings is our conclusion, SELL.”
The note from Liberum comes just a few days after Jefferies reiterated an 'underperform' rating on the stock.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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