On Thursday, Domino’s Pizza Inc cautioned about a slowdown in its delivery business, citing a shift in consumer behavior towards cooking at home rather than ordering in. This news caused a 6 percent drop in the company’s shares, offsetting the better-than-expected first-quarter results.
As inflation levels have risen, consumers’ disposable income has been stretched thin, making them more cautious about spending on expensive food items and increased delivery fees.
The cost of cheese, meat, fuel, and labor has been rising, impacting restaurant chains including McDonald’s Corp and Chipotle Mexican Grill Inc. To safeguard its profit margins, Domino’s Pizza Inc has increased menu prices and delivery charges.
To appeal to consumers feeling the pinch of inflation, the pizza chain has reintroduced the USD 3 Carryout Tips promotion. Under this offer, customers who place a carry-out order of USD 5 or more will receive a USD 3 promo that can be redeemed towards another carry-out order.
During an earnings call, Domino’s Chief Financial Officer Sandeep Reddy reported that the carry-out business was performing well, with the new menu item “Loaded Tots” seeing higher sales.
Reddy also mentioned that there was a shift in demand from delivery to in-restaurant dining, indicating that more customers were returning to dine-in at restaurants.
Siye Desta, an analyst at CFRA Research, stated that consumer spending patterns would return to normal, with pizza delivery orders expected to contribute to the overall sales growth.
According to Refinitiv data, same-store sales at Domino’s, the largest pizza chain globally, increased by 3.6% in the first quarter, surpassing analysts’ estimated growth of 1.96%.
The company’s adjusted earnings per share stood at USD 2.93, exceeding the estimated USD 2.73. However, despite a 1.3% increase in total revenue to USD 1.02 billion, the figures fell short of estimates of USD 1.04 billion due to the impact of a strong dollar.