Domino’s same-store sales rose 3% in the U.S. in the second quarter ended June 16, the company said Tuesday, the 33rd consecutive period of increases for the Ann Arbor, Mich.-based chain.
But it was also the lowest result in seven years, continuing a general slowdown that has lasted for several quarters now.
The results sent the company’s stock plunging nearly 8% early Tuesday. The same-store sales were below investors’ expectations.
Domino’s executives on the company’s earnings call Tuesday said that growing competition from third-party delivery providers such as Uber Eats, DoorDash and Grubhub has put pressure on sales.
“We continue to see a significant amount of pressure from third-party aggregators,” CEO Ritch Allison said. He said delivery providers are offering “a substantial amount of discounting as they try to gain market share.”
Investors have been increasingly concerned about the impact delivery providers are having on the key same-store sales metric, fearing that services are taking away some of Domino’s business.
That competitive threat is intensifying as the providers market along with fast-food companies such as McDonald’s, Taco Bell and Wendy’s.
Allison said he does not expect third-party services to slow their marketing or discounting efforts anytime soon. “We expect that behavior to continue for some period of time,” he said. “While the economics of the business is still an open question for the long term, in the near-term, investors appear to be very willing to lose a lot of money … to drive trial and market share.”
Adding to investors’ fears over Domino’s was the company’s traffic performance in the second quarter.
The company said that its same-store sales were “largely ticket driven” as franchisees raised menu prices and delivery fees. Allison said that the higher prices and fees were in part to offset higher minimum wages in many markets.
Investors also fear that the company’s “fortressing” strategy is halting its same-store sales momentum. Domino’s has been more aggressively building units in the U.S., in part to speed delivery and bolster takeout sales.
The company opened a net 42 locations in the second quarter in the U.S., and 200 worldwide. The brand now operates 5,945 locations domestically, to go along with 10,369 international units.
“It was a good second quarter, particularly for global unit growth, as we continue to seek balanced retail sales growth through the blend of same-store sales and store growth,” Allison said in a statement.
Internationally, Domino’s same-store sales rose 2.4%. It was the chain’s 102nd straight quarter of increases outside the U.S.
Revenues at Domino’s increased 4.1% to $811.6 million, from $779.4 million. Net income rose 19.3% to $92.4 million, or $2.19 per share, from $77.4 million, or $1.78.