What happened
Shares of Domino's (DPZ -0.77%) fell this week, dropping 14% through Thursday trading compared to a 1.6% decline in the wider market, according to data provided by S&P Global Market Intelligence. The pizza chain's shares are now down 11% so far in 2023 and have declined over 20% in the past full year.
This week's drop came as investors digested Domino's fourth-quarter earnings update.
So what
Wall Street was disappointed to learn that Domino's could not build on the positive momentum it achieved in the third quarter. Comparable-store sales growth decelerated in the core U.S. market, down to just 1% compared to 2% in the prior quarter. That result looks worse when stacked up against industry leader McDonald's (MCD -0.23%), which achieved accelerating growth in the fourth quarter as comps hit 10%.
Management hinted at increased competition, rising costs, and struggles at keeping its restaurants fully staffed. "We experienced significant pressure on our U.S. delivery business in 2022," CEO Russell Weiner said in a press release.
Now what
Domino's main challenge is to end the slide in market share that the fast-food company has suffered over the last several quarters. Management is hoping to achieve this goal by its delivery platform so that it once again leads the industry in factors like convenience and value.
Domino's is also leaning on its dominant carry-out service, which is supported by a large network of restaurants blanketing most of the country.
The company doesn't issue a short-term operating outlook, but the latest results indicate that Domino's hasn't hit upon the answer to all of these challenges yet.
That's why investors can continue to expect pressure on the stock. It is likely that the chain will return to its past pattern of market-beating earnings growth. But the timing of that rebound is a major question on Wall Street's mind today.
