Note to investors: “Torrid expansions” always wane.
— Jason Clampet
In the eyes of some investors, Domino’s Pizza Inc. is no longer delivering.
Despite third-quarter results that topped analysts’ estimates, slowing sales growth is raising concerns that the pizza chain’s torrid expansion may be waning. The shares suffered their worst decline in more than two months.
Though Domino’s is still posting same-store sales that most of the restaurant industry would salivate over, investors’ lofty expectations for the chain have become hard to meet. The company has now disappointed shareholders with its last two earnings reports — following four straight quarters of upside.
The shares had surged in the weeks leading into the latest earnings report, with investors betting that Domino’s would post a strong quarter, according to Michael Halen, an analyst at Bloomberg Intelligence. Once the company reported results, some of those shareholders started taking profits, Halen said.
“These strong numbers were already baked in,” he said. “The thesis played out.”
The stock fell as much as 6 percent to $196.70 after the results were posted. It had been up 31 percent this year through Wednesday’s close.
Domino’s domestic same-store sales rose 8.4 percent last quarter. While that beat the 6.5 percent predicted by analysts, it was below the 9.5 percent pace in the previous three months.
Earnings amounted to $1.27 a share in the third quarter, excluding some items. Analysts estimated $1.22.
©2017 Bloomberg L.P.