Another broker turns up its nose at Domino’s offering
INVESTORS went off shares in pizza deliveries firm Domino’s today as a second broker in the space of a few days expressed concerns about the company’s prospects.
Berenberg followed Investec’s lead as it swapped its Buy rating for a Hold, admitting that the sales slump which damaged the share price in March could be more than just a minor blip.
“While we initially thought this would bounce back quickly, we increasingly believe that some issues could create continued pressure on near-term performance,” said Berenberg analyst Ned Hammond.
As well as the consumer slowdown, he says food price inflation is a big problem. This will probably affect franchisee margins, Hammond argues. As Domino’s passes on higher costs, franchisees could stop investing in marketing and local deals, which would hurt sales.
Investec argued earlier in the week that Pizza Hut was aggressively undercutting Domino’s, but Hammond seemed more concerned about the threat from the tech upstarts such as Just Eat and Deliveroo. “New players are changing the game and Domino’s is currently proving slow to react.”
The shares, down as much as 9% in early trading, slipped 10.5p, or 3.6%, to 280.2p, taking losses this week to 14%.
The oil price crept back up above $45 a barrel, but it was not enough to prevent the FTSE 100 from extending its losing streak, off 26.27 points to 7413.02 in reaction to stronger sterling.
ITV topped the blue-chip index after Morgan Stanley upgraded the broadcaster of Britain’s Got Talent to Buy, arguing the valuation is now “very attractive” after recent falls. Despite admitting “everything’s bad”, the worst being advertising, the investment bank suggests the share price is accounting for this. It is up 3.9p to 180.8p.
Whitbread lost 16p to 3925p after Premier Inn said it was “extremely concerned” by a review which revealed three of its hotels used cladding similar to that at Grenfell Tower and did not comply with government guidance.
On AIM, shares in Animalcare were suspended as the vet products supplier unveiled a deal to buy Belgian rival Ecuphar with cash and shares valuing the enlarged group at £210 million. @jamienimmo63