Food & Beverage

The 'Domino's effect': Company's stock price surge sets off 'chain' reaction

Domino's better-than-expected earnings report last Thursday morning set off a wave of optimism among investor in its competitors too.

July 26, 2021 by S.A. Whitehead — Food Editor, Net World Media Group

Domino's says it's the world's largest pizza chain and that designation proved its influence late last week when the Ann Arbor, Michigan chain's stock prices soared following markedly better-than-expected second quarter earnings report on Thursday.

Almost instantly, the ripples of that stock price surge washed into the brand's competitor's camp at Papa John's sending that company's stock price on an impressive ascent as well. There was even some movement at Yum Brands, the parent of Pizza Hut and several other limited-service brands, showing investors' overall abiding faith that it's tough to keep a good pizza down, regardless of everything from labor shortages to COVID-19 Delta variants.

First then, a closer look at the Domino's closing price on Friday of $525.45, a whopping $42.77 increase from the close the previous Friday of $482.68.

Movement like that in the pizza's crust, causes rumblings across the category, which first shook up things at Louisville, Kentucky-based Papa John's, which also saw its price bounce up more than $5 in the period from its close last Thursday to its open after the Domino's earnings report Friday morning. In fact, by the close of trading Friday afternoon, Papa John's managed a healthy boost in its stock price, as well, which jumped from $108.40 the previous Friday's close, to $117.97 last Friday at the end of trading.

Fellow Louisville player, Yum Brands — parent company of Pizza Hut, as well as a handful of non-pizza brands — also saw a gain of Louisville, Kentucky-based company, Yum Brands — owner of Pizza Hut — also recorded a week-over-week gain of $6.94 to close Friday at $122.79. Even the smaller Pie Five and Pizza Inn company, Rave Restaurant Group experienced some price lift last week, increasing from $1.25 the previous Friday to $1.38 at the close July 26.

Cheese

Cheese prices were down on average last week, but the U.S. Department of Agriculture said the cheese market, in general, is a little shaky right now, so changes could be in the works. In Chicago, barrels closed at $1.40, while 40-pound blocks rang in at $1.59. The weekly average for barrels was down about 17 cents to $1.40 while blocks lost about 13 cents to come in at an average price of $1.57.

Cheese sales are noted as steady or strong for producers across the nation, according to the U.S.D.A., with cheese prices even entices some export purchases, according to the department contacts around the industry.

In the Midwest, the U.S.D.A. said spot milk prices are moving higher, from $5 to $3 under Class III, when last year those prices at this time were $2 under to Class III, for comparison.

Some Midwestern cheesemakers say they are currently overcommitted on near-term sales, while Eastern contacts report that limits on storage capacity, load delivery snags and port congestion aren't helping.

Wheat

Wheat prices averaged $6.92 per bushel Friday, which was lower for the week. Hot, dry weather continues to be an issue for wheat farmers, with domestic supplies of the commodity lowering, in general. On Friday, September Chicago soft red winter wheat futures fell more than 13 cents to $6.79, while in Minneapolis, September spring wheat futures lost fell more than 16 cents to $8.88. September Kansas City hard red winter wheat futures were down nearly 14 cents to $6.40.

Auto fuel

Some cheering news on the auto fuel front this week, as pump prices are lowering as summer driving demands begin to flatten out, according to the American Automobile Association. Over last week, the national average for a gallon of regular gasoline fell 2 cents to $3.15.

In its latest weekly report, the U.S. Energy Information Administration reported that gas demand grew from 9.28 million barrels per day (b/d) to 9.30 million b/d last week, deemed notably less than usual. Additionally, total domestic gas stocks saw a slight decline to 236.4 million barrels.

AAA said such trends have helped to stabilize price increases. In fact, over the past week crude oil prices have fluctuated, which could mean cheaper prices ahead if they remain lower. All that said, AAA expects the national average to remain above $3 per gallon throughout the summer.

Earlier last week, crude prices fell to $66 per barrel due to market concerns that the spread of the COVID-19 delta variant will slow potential economic growth. However, market concern about the ongoing pandemic has reversed, helping to push crude prices higher.

Last week, the largest changes nationally in state gas prices were led by Utah, Nevada and Idaho, which each added 8 cents to the price of their gas per gallon. Michigan was next with an average 7-cent-per-gallon increase, followed by Ohio, where the per-gallon price grew an average of 6 cents last week.

The average price of a gallon of regular this morning nationally rang in at $3.16, down about a half-cent from the previous week. Mid-grade ($3.51) and premium ($3.78) were each down about a cent on the week. At $3.27, Diesel was flat on the week, while at $2.65, E85 was down almost 2 cents over the seven days.

Natural gas

Natural gas spot price movements were mixed for the seven days that end on July 21, while the Henry Hub spot price rose from $3.75 per million British thermal units (MMBtu) to $3.91/MMBtu over that period.

The price of the August 2021 NYMEX contract increased 30 cents, from $3.66/MMBtu to $3.96/MMBtu over the period. The price of the 12-month strip, averaging August 2021 through July 2022 futures contracts, climbed 22 cents/MMBtu to $3.69/MMBtu.

Propane prices fell 1%, a smaller decline than the decrease in the crude oil price, and current propane inventories are now at the bottom of the five-year range for this week of the year. Normal butane and isobutane prices fell by 2% and 1%, respectively, also a smaller decline than the decrease in the crude oil price, reflecting relatively low inventories and continued robust export activity since last year. Natural gasoline prices, which most closely follow crude oil prices, fell 4%. Ethane prices rose 2%, supported by rising prices of ethylene, a basic chemical produced primarily from ethane, which had a 4% price increase week over week.

About S.A. Whitehead

---

Pizza Marketplace and QSRweb editor Shelly Whitehead is a former newspaper and TV reporter with an affinity for telling stories about the people and innovative thinking behind great brands.