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Domino's (DPZ) Shares Fall 20% in a Year: What's Hurting It?

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Shares of Domino's Pizza, Inc. (DPZ - Free Report) have declined 20.2% in the past year against the Zacks Retail - Restaurants industry’s growth of 7.2%. The decline was primarily caused by the challenging macro environment, which is impacting the company's U.S. delivery business.

Recently, Domino’s reported fourth-quarter fiscal 2022 results, wherein revenues missed the Zacks Consensus Estimate by 3%. This resulted from declining delivery business, same-store demand and lower order counts. There were additional macroeconomic factors that affected growth of the company significantly.

Earnings estimates for 2023 have declined in the past 60 days to $12.93 per share from $14.08, depicting analysts’ concerns over DPZ’s growth prospects.


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Image Source: Zacks Investment Research


Let’s delve deeper and analyze the factors that are hurting this Zacks Rank #4 (Sell) company.


Domino’s witnessed tepid fiscal 2022 performance majorly from its U.S. sales. In fiscal 2022, revenues from the U.S. company-owned stores declined 6.9% to $445.8 million from fiscal 2021. Same-store sales declined 0.8% year over year. The decline was caused by lower order counts and a reduction in delivery orders. Labor shortages in stores attributed to the results as the same affected store hours.

Inflationary pressures continue to hurt the company. The U.S. market was challenging for Domino’s in 2022, as the company faced a significant rise in inflationary pressures that projected an increase in input, labor, fuel and commodity costs. The increase in costs is affecting its overall operating activities and margins.

In fiscal 2022, the gross and net income margins declined 240 basis points (bps) and 170 bps, respectively. The supply-chain gross margin declined 8.2% in fiscal 2022 majorly due to higher delivery and labor costs. High costs are likely to hurt the company in the upcoming period.

Apart from lower U.S. sales, its International business is hurting the company. International same-store sales inched up 0.1% in 2022 compared with the increase of 8% reported in 2021.

Growth Projections

The two- to three-year outlook for Global retail sales growth (excluding foreign currency impact) is anticipated at 4-8%, down from the previously mentioned 6-10%. The two- to three-year outlook for Global net unit growth is expected to be 5-7% compared with the previously stated 6-8%.

Key Picks

Here are some top-ranked stocks that investors may consider in the Zacks Retail-Wholesale sector.

Chuy's Holdings, Inc. (CHUY - Free Report) currently sports a Zacks Rank #1 (Strong Buy). CHUY delivered a trailing four-quarter earnings surprise of 19.1%, on average. Shares of CHUY have risen 49.4% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the year-ago period’s reported levels.

Arcos Dorados Holdings Inc. (ARCO - Free Report) flaunts a Zacks Rank #1 at present. ARCO has a long-term earnings growth rate of 7.8%. Shares of the company have gained 3.3% in the past six months.

The Zacks Consensus Estimate for ARCO’s 2023 sales suggests growth of 8.7% from the year-ago period’s reported level, while the same for EPS indicates a decline of 4.4%.

Brinker International, Inc. (EAT - Free Report) carries a Zacks Rank #2 (Buy). EAT has a long-term earnings growth rate of 7.1%. The stock has gained 43.7% in the past six months.  

The Zacks Consensus Estimate for EAT’s fiscal 2023 sales suggests growth of 8.2% from the year-ago period’s reported level, while the same for EPS suggests a decline of 12%.

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