Earnings At Domino’s Fall Short Of Forecasts As The Pizza Operator Battles With A Driver Shortage And Rising Costs

Domino’s Pizza posted mixed quarterly earnings on Thursday, citing increasing expenses 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.

During the second quarter, same-store sales at the Ann Arbor, Michigan-based corporation decreased both at home and abroad. Sales in the United States have been harmed as a result of certain sites reducing their hours due to a driver shortage. To address customer service issues, nearly 40% of Domino’s U.S. locations use call centres to process orders, allowing their employees to focus on creating and delivering pizzas.

Domino’s also stated that it anticipates food expenses to rise further and that unfavourable foreign currency exchange rates will reduce overseas revenue more than previously anticipated.

Domino’s stock was up slightly in afternoon trading.

Here’s how the company’s results compared to what Wall Street expected, according to a Refinitiv poll of analysts:

Earnings per share: $2.82 vs. $2.91 expected

Revenue: $1.07 billion vs. $1.05 billion expected

Net income for the three months ended June 19 was $102.5 million, or $2.82 per share, a decrease from $116.6 million, or $3.06 per share, the previous year.

Sales increased by 3.2 per cent to $1.07 billion. Domino’s attributed the increase in revenue primarily to the higher food prices it charges franchisees. Operators paid 15.2 per cent more this quarter than they did the previous year.

Price increases of over 6 per cent and robust carry-out order growth boosted sales, but not enough to compensate for understaffing. In the United States, same-store sales decreased 2.9 per cent due to harsh comparisons with the previous year, which was aided by stimulus checks and individuals ordering more pizza at home.

According to StreetAccount projections, Wall Street expected domestic same-store sales growth of 5 per cent.

During the conference call, officials stated that they believe they can resolve staffing issues internally and will not seek assistance from third-party delivery businesses such as Doordash. Rivals Pizza Hut and Papa John’s have relied on third-party agreements in recent quarters to address driver shortages. Such collaborations can boost sales but often reduce earnings due to the commission fees imposed every order.

International same-store sales fell 2.2 per cent, excluding foreign currency fluctuations. According to Domino’s, a tax holiday in the United Kingdom increased sales a year ago, but the government did not repeat it this year. Analysts anticipated around flat same-store sales growth for the chain’s foreign division.

This quarter, the company launched 233 net new stores, the vast majority of which were overseas.

Domino’s now expects food basket prices to rise 13 per cent to 15 per cent in fiscal 2022, up from 10 per cent to 12 per cent previously. In addition, executives predicted that new shop development would decelerate due to inflation. Foreign currency exchange rates will also cost the corporation $22 million to $26 million in sales, up from its earlier estimate of $12 million to $16 million.

(Adapted from CategoryPortal.com)

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability

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