Pizza’s Pandemic Growth Cools as Domino’s Reports Sales Decline

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The decline in same-store sales in the US is the company’s first in more than a decade, as the chain slashes hours and hunts for drivers.

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Domino’s and rival chain Pizza Hut and Papa John’s International Inc.

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Last year benefited from a flood of delivery and takeout orders as restaurants closed dining rooms during the pandemic. Now, most restaurants have reopened their dining rooms, slowing growth in delivery sales. Nearly 30% of American diners said they expected to order less delivery from restaurants in the future, according to a survey of 963 Americans last month by industry research firm Revenue Management Solutions.

Domino’s attributed some of the decline in US orders during this period to a reduction in federal stimulus payments to consumers. The company said the springtime government payments that helped the chain and other restaurants didn’t happen again in the summer, driving down sales. Chief Executive Rich Ellison told investors that delivery sales were particularly affected by lower payments to US consumers.

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The Ann Arbor, Mich.-based company said ongoing staffing problems resulted in reduced hours and service at Domino’s stores, disappointing sales. The workforce problem, and the added burden for workers that companies have, is a common challenge in industries ranging from manufacturing and healthcare to air travel.

The company said it is trying to bring in more customers to its carryout business due to the shortage of delivery drivers. “There is no doubt that we will continue to experience challenges with covid with staff and other factors,” Mr Ellison said.

Domino’s shares rose 2% to $488 in morning trading, having recovered after a premarket fall.

Restaurants have had a bumpy year in recent weeks as the Delta version of the virus sparked renewed dine-in sales. Rising supply and labor costs are eating into profits, and industry executives expect rising inflation to further shrink their margins next year. Restaurants are passing on the cost to consumers, with fast-food prices rising 6.7% compared to the year ending in September, according to Labor Department data.

Mr Ellison said he expects labor to continue to be a problem as people leave the workforce and immigration to the US has fallen. The chain said it is raising wages to recruit workers, and trying to make its restaurants more efficient by reducing labor hours.

Domino’s posted sales of $998 million for the three months ended September 12, lower than the $1.03 billion estimated by analysts surveyed by FactSet. Domino’s reported a profit of $3.24 per share, adjusted for one-time items. Analysts were expecting a profit of $3.11 per share.

Worldwide, 323 new Domino’s stores opened in the quarter, of which 45 in the US Mr Allison said resulted in fewer US stores opening than he expected as a result of supply chain constraints and permission delays.

Domino’s said on Thursday it expects US price inflation for next year to hit labor and commodity pressures at higher levels than its projected guidance.

Heather Haddon [email protected] . Feather


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