Domino's Pizza (DPZ) stock plummeted 5.04% during intraday trading on Friday, as investors reacted to concerns about the impact of newly announced tariffs on the restaurant industry. The sharp decline comes amid a broader selloff in restaurant stocks, with several major chains experiencing significant losses.
Analysts at Stifel have warned that the restaurant sector could face substantial challenges due to the tariffs. The primary concern is not direct cost increases, but rather the potential reduction in consumer spending power. As tariffs may lead to price hikes and job losses in various industries, Americans are expected to have less disposable income for dining out. Stifel analyst Chris O'Cull noted that tariffs are likely to "hit wallets harder than kitchens, leaving restaurants hungry for customers."
For companies like Domino's Pizza, which has significant international exposure, there's an additional risk of negative sentiment in overseas markets. The potential for anti-American sentiment could impact sales trends in international locations, further pressuring the company's performance. While Domino's and other restaurant chains may not face substantial increases in food costs due to current tariff exemptions on many agricultural products, the indirect effects on consumer behavior and global operations pose significant challenges for the industry.
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