Please ensure Javascript is enabled for purposes of website accessibility

Why Domino's Stock Lost 12% in July

By Demitri Kalogeropoulos - Aug 7, 2019 at 9:09AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The pizza delivery leader's growth is slowing.

What happened

Domino's (DPZ 2.90%) stock trailed the market last month, shedding 12% compared to a 1% uptick in the S&P 500, according to S&P Global Market Intelligence. That decline put the restaurant chain in negative territory for the year compared to a 17% increase in the wider market.

Young adults eating pizza at a picnic table.

Image source: Getty Images.

So what

Investors pushed shares lower after the pizza delivery leader reported sluggish sales growth for the fiscal second quarter. In mid-July, Domino's revealed its fifth consecutive quarter of slowing comparable-store sales, which fell to 3% from 4% in the previous quarter. Shareholders had enjoyed comps of 8% as recently as early 2018.

Now what

Domino's executives said that some of the slowdown can be pinned on the chain's "fortressing" strategy that involves adding locations close to existing stores. This initiative pressures sales growth in the short term but boosts earnings and revenue over time by keeping competitors locked out. Thus, investors can reasonably expect growth to accelerate in future quarters. It's also important to remember that Domino's is still capturing market share even at its reduced expansion rate. Yet the stock may continue trailing the S&P until sales growth stabilizes, both in its core U.S. geography and in the international division.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Domino's Pizza, Inc. Stock Quote
Domino's Pizza, Inc.
DPZ
$365.91 (2.90%) $10.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
356%
 
S&P 500 Returns
124%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.