Domino’s And Papa John’s Shares Are Soaring Thanks To Booming Pizza Sales

TOPLINE

While most of the restaurant industry reels from the economic impact of coronavirus, pizza chains are thriving and sending their stocks higher thanks to a surge in online orders and steady demand during the pandemic.

KEY FACTS

What to watch for

Even as Domino’s and Papa John’s outperform in a challenging environment, Pizza Hut continues to struggle. Yum! Brands, the parent company of Pizza Hut which also owns brands like Taco Bell and KFC, has seen its stock fall over 12% so far this year. The stock has rebounded to some degree over the past few months, jumping 32% in April and May. According to Yum! Brands’ first quarter earnings, Pizza Hut’s same-store sales plunged 11% during that period. Pizza Hut’s interim U.S. president Kevin Hochman is confident that the chain can make a recovery, telling Yahoo! Finance in an interview earlier this week that “we want to get back to being America’s favorite pizza… we made tremendous progress even over the last ten weeks.”

Key background

The coronavirus has accelerated a shift toward digital sales for many restaurants with much of those gains “likely to be maintained longer-term,” according to UBS analyst, Dennis Geiger. The firm expects digital and mobile growth, “which was already an increased focus for larger chains,” to continue well beyond the pandemic.

Chief critic

It remains to be seen whether booming pizza sales will continue as more of the country reopens. “Some of these gains in May should subside in June because dining rooms are reopening and people are starting to venture out a little more,” says Bloomberg Intelligence restaurant analyst Michael Halen. At some point, as quarantine orders are lifted, sales will inevitably decline to normal levels, he adds. A second surge of coronavirus in the fall or winter, however, “would obviously be a boon for sales again.”

Further reading

Dow Closes Above 25,000 For First Time Since March (Forbes)

Dow Surges 500 Points As Investors Bet On A Coronavirus Vaccine Breakthrough (Forbes)

Here Are 13 Stocks That Both Hedge Funds And Mutual Funds Are Buying Up (Forbes)

Buy These Stay-At-Home Stocks For The Coronavirus Economy, Market Experts Say (Forbes)

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