Domino’s earnings miss expectations as pizza chain struggles with driver shortage, higher costs
Domino’s Pizza on Thursday reported mixed quarterly results as the pizza chain struggled with higher costs and an ongoing shortage of delivery drivers.
“I can assure you that nobody at Domino’s is happy with our recent performance,” CEO Russell Weiner told analysts on a conference call.
The Ann Arbor, Michigan-based company’s same-store sales fell at home and abroad during the second quarter. Sales in the U.S. have been hurt by some locations shortening their hours as a result of the driver shortage. To address customer service difficulties, roughly 40% of Domino’s U.S. restaurants are using call centers to take orders so their workers can focus on making and delivering pizzas.
Domino’s also said it expects food costs to keep rising and unfavorable foreign currency exchange rates to drag down its international revenue more than previously forecast.
Shares of Domino’s were up modestly in afternoon trading.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.82 vs. $2.91 expected
- Revenue: $1.07 billion vs. $1.05 billion expected
Net income in the three-month period ended June 19 was $102.5 million, or $2.82 per share, down from $116.6 million, or $3.06 per share, a year earlier.
Net sales rose 3.2% to $1.07 billion. Domino’s largely attributed the increase in sales to the higher food costs it’s charging franchisees. This quarter, operators paid 15.2% more than they did a year ago.
Price increases of nearly 6% and strong carry-out order growth also boosted sales but weren’t enough to offset the blow from understaffing. In the U.S., same-store sales fell 2.9% as it faced tough comparisons in the year-ago period, which was helped by stimulus checks and people ordering more pizza at home.
Wall Street was expecting domestic same-store sales growth of 5%, according to StreetAccount estimates.
During the conference call, executives said they believe they can resolve staffing troubles internally, indicating that they won’t be tapping third-party delivery companies like Doordash for help. Rivals Pizza Hut and Papa John’s have been leaning on their third-party partnerships in recent quarters to alleviate the shortage of drivers. Such partnerships can help sales but typically hurt profits because of the commission fees charged per order.
International same-store sales, excluding foreign currency changes, declined 2.2%. Domino’s said a tax holiday in the United Kingdom drove sales higher a year ago, but the country didn’t repeat it this year. Analysts were forecasting roughly flat same-store sales growth for the chain’s international unit.
The company opened 233 net new stores this quarter, the vast majority of them overseas.
For fiscal 2022, Domino’s is now expecting food basket prices to climb 13% to 15%, up from its prior forecast of 10% to 12%. Executives also said new store development will likely slow because of inflation. The company also said that foreign currency exchange rates will weigh on its revenue by $22 million to $26 million, up from its previous outlook of $12 million to $16 million.