Pizza Has Gone Cold. Domino’s Is Still Worth a Look - WSJ

Pizza Has Gone Cold. Domino’s Is Still Worth a Look - wsj

https://www.wsj.com/business/hospitality/pizza-has-gone-cold-dominos-is-still-worth-a-look-38fab850

The category’s sales are stagnant and its chains are faltering, but Domino’s can emerge as a winner

By David Wainer

June 25, 2026 at 5:30 am ET

Americans aren’t as hungry for pizza. Neither is Wall Street. But there could be value in the sector’s leftovers.

Pizza chains once owned a reliable American ritual: a sit-down dinner under a red-roofed Pizza Hut or a predictable Domino’s delivery on a lazy TV night. The growing American appetite for chain pizza made Domino’s Pizza one of the best restaurant stocks to own for decades.

But in recent years DoorDash and Uber Eats killed the delivery moat, placing every corner pizzeria on equal footing with national brands. Open a delivery app today, and a local slice shop sits beside Domino’s, competing for attention with tacos and wings. Or, for those feeling economic pain, there is ever more variety in the frozen aisle.

The result is a category stuck in neutral. Data from market-research firm Technomic shows pizza’s share of U.S. restaurant spending has slipped in recent years as consumers shift toward other categories, like chicken and Mexican.

Investors are waving the white flag. Yum Brands sold Pizza Hut this month for $2.7 billion. Papa John’s has floated a sale. Midsize chains are closing locations. Even the category leader is getting punished: Domino’s shares are down nearly 40% over the past year.

Slowing sales and a sudden leadership change accelerated the rout. This week, Domino’s said Chief Operating Officer Joe Jordan will replace Chief Executive Russell Weiner. Investors were surprised by the timing of the shake-up and are viewing it as a flashing red light, fearing Jordan will scrap long-term growth targets.

There is good reason for the concern. Domino’s shares dropped in April after first-quarter U.S. same-store sales growth came in at just 0.9% and management abandoned its prior 3% target for 2026.

The company reports second-quarter results next month, and the short-term setup for investors looks tough. RBC Capital analyst Logan Reich notes Domino’s is lapping the initiatives that juiced 2025—the introduction of stuffed crusts decades after Pizza Hut and its arrival on DoorDash—with no easy levers ahead.

Look closer, though, and Domino’s still offers a growing slice of the pie. Even if net expansion significantly slows from the 175 new U.S. stores the company was aiming for this year, Domino’s is still growing every year while Pizza Hut and Papa John’s are shrinking. Its share of sales among the top three public pizza chains climbed to 54% in 2025 from 38% in 2016, according to J.P. Morgan data. Pizza Hut, meanwhile, has gone from 41% to 27% in that period.

As competitors intensify their value offerings, Domino’s might continue to face near-term pressure to match them or cede back market share. But the chain is betting that it can outlast rivals that are discounting their way toward store closures.

Ultimately, it comes down to franchisee economics. Domino’s is larger, and its vertically integrated supply chain allows it to keep ingredient costs low, while its advertising budget exceeds its two largest competitors combined. Profitability has come down at all pizza chains, but a typical Domino’s restaurant still crushes Pizza Hut, with $166,000 of earnings before interest, taxes, depreciation and amortization per unit versus about $55,000 for Pizza Hut, according to Evercore ISI.

The corporate entity, likewise, is a cash machine. Because franchisees fund store openings, corporate operations stay asset-light. That means capital needs remain low, freeing up mountains of cash that can be returned to shareholders: Last year, free cash flow grew to $672 million, about three times what it was a decade prior.

This financial engine protects returns when growth stalls. The company has steadily increased its dividends every year while plowing cash into share buybacks. In other words, even if same-store sales growth stays stuck in low gear, buybacks mean that earnings per share can keep growing at a mid-single-digit rate.

So what becomes of Domino’s once the industry settles into a new normal? The recent market selloff has pushed the stock to about 14 times forward earnings—a valuation not seen since the years after the 2008-09 financial crisis. Franchise peers like Yum Brands and McDonald’s trade around 20. For patient investors to come in at this lower multiple, Domino’s doesn’t need to be a high growth darling again. It just needs to reset expectations and continue to be a reliable earnings compounder.

American tastes are evolving, and the pie available to Big Pizza is shrinking. But Domino’s can still prosper with its share.

*(**Note**: for the marketshare chart on Pizza vs Mexican/Chicken: and marketshare among Dominos, PizzaHut and Papa John, you can find it in you-know-where. Disclosure I bought a tracker stock in Yum China yesterday, they will own the Pizza Hut brand in China.)*