Domino’s Pizza just reported its best sales result in nearly two years, a result that increased its already sizable share of the fast-food pizza market. The company’s push into third-party aggregators appears to be a success, and it was able to flex its muscles with a $9.99 any pizza deal profitable enough that franchisees pushed to extend the offer.
Don’t take that result, however, as signs of a fast-food comeback. And do not take our word for it. Just ask, oh, the CFO.
“Our comp could be pressured by the macro environment in the U.S., which we’ve seen intensify across the restaurant industry at the start of the second quarter,” Sandeep Reddy, Domino’s CFO, told analysts on Tuesday.
“We’ve definitely been seeing a slowing across restaurant industry sales to start our fourth quarter, and that’s a factor that’s out there,” he added later.
Those of you who’ve been paying close attention to restaurant industry sales and traffic results this year might be alarmed by the concept that things slowed down over the past month. How could it get any slower?
But Domino’s is not the only one saying these things. In the most recent episode of the A Deeper Dive podcast, Technomic’s Rich Shank suggested that sales have slowed again after improving in the summer months. The foot traffic tracking firm Placer.ai recently noted some weak traffic to quick-service chains over the past couple of months.
That difficult environment has improved and worsened with news on tariffs, restaurant prices, immigration crackdowns and other issues, but which has been generally weak for the past two years.
Declines in the Consumer Confidence Index requently leads to sales challenges. That index weakened again in September, which could explain the weakening environment over the past month. The labor market is also weakening, and jobs are crucial to restaurant sales.
Much of what is creating this consumer weakness is a bifurcated consumer—a “two Americas,” as McDonald’s CEO Chris Kempczinski noted last month. A parade of other executives from a wide variety of industries have echoed similar sentiments. A JPMorgan survey suggested a massive disparity between low- and high-income consumers on the economy. Low-income consumers are “living on the edge,” according to the CEO of Wells Fargo.
That bifurcation is expected to continue, according to the National Restaurant Association, which expects the economy to grow next year despite all this noise. That has helped prop up some sectors while increasing demand for costly services such as third-party delivery. But that doesn’t help the large number of chains struggling with weak sales and traffic, or the small chains filing for bankruptcy because they can no longer survive in a market such as this one.
The result of all this has been arguably the most extensive discount war the industry has seen, one that spans formats and services, including delivery, loyalty programs, local and national discounts. Nearly three out of ten orders in the restaurant industry are now on some form of discount.
That’s insane, and yet there is no evidence this is actually getting people to come in more often. They’re just getting cheap food when they do come in.
Some brands have clearly figured out how to do this more effectively than others. Chili’s, with its 3-for-Me deal and the marketing behind it, obviously did. But so has Domino’s. Its $9.99 “Best Deal Ever” promotion resonated with consumers enough to generate actual traffic growth.
“Consumers are building and eating their dream pizzas,” Domino’s CEO Russell Weiner told analysts. “In a world where prices have gone up and discounts never seem to be on the items you truly want, Domino’s gives customers their favorite pizzas at the best price.”
It was certainly enough to give Weiner confidence in the company’s ability to keep taking pizza market share, despite a tough environment. “It really puts distance between us and our competition and that puts pressure on the economics of their stores,” he said. “So even some short-term restaurant headwinds leads to share gains and long-term gains for Domino’s.”