ASX:DMP Domino’s Pizza lags behind in the fast food race
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The fast-food industry’s business model of opening new branches in a very short space of time can cause companies to feel uneasy – a risk that investors in the newly listed company Guzman y Gomez appear to have largely ignored.
Recently, GYG’s market capitalization of $3.1 billion overtook Domino’s at $2.96 billion. Domino’s posted a net profit of $120 million, while GYG earned about $6 million.
Domino’s is scaling back some of its international colonization plans, but is focusing on growth in a few select countries such as Germany.
The fast food industry is struggling. First of all, there is the cost of living crisis, which is forcing some customers out of the market.
GYG has a huge long-term expansion plan in Australia and overseas, and it seems investors are falling for it. GYG shares were issued at a price of $22 and are currently trading at $32.62. One broker, Morgans, has laid out its optimistic forecast that the shares will reach a heroic $62.
McDonald’s recently announced disappointing first quarter results.Credit: AP
This would make GYG a diamond in the rough in the fast food market.
The largest McDonald’s group in the USA recently presented disappointing figures for the first quarter. CEO Chris Kempczinski attributed the result to boycotts of American companies in various countries in response to the Gaza war.
However, weak sales in the US were due to low-income customers consuming less fast food, he said.
Collins Foods, which owns KFC stores in Australia and Europe, reported strong results for its 2024 financial year, but said the first seven weeks of the new financial year, in which Australian sales rose a somewhat paltry 1.5 percent, were due to the continuation of the weaker consumer situation in Australia and that the conflict in the Middle East was also impacting sales in Europe.
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Chief Executive Kevin Perkins sought to prepare Collins Foods investors for a difficult period ahead, saying that significant cost of living and inflation pressures were expected to remain for most of the coming year and that while commodity prices were stabilizing, labor and energy costs remained high globally.
While the trendy Mexican fast food wave is sweeping the world, pizza may not be the big hit this year.
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