Inflation and staffing shortages take a bite out of Domino’s

The pizza chain’s same-store sales declined 3.6% in the U.S. in the first quarter while earnings declined amid a number of challenges that executives warned could persist into the future.
Domino's earnings
Photograph: Shutterstock

A combination of rising inflation, the omicron variant and staffing shortages hit Domino’s Pizza hard in the first quarter, the company said on Thursday, as both sales and profits declined, while executives warned of challenges continuing into this year.

Same-store sales in the U.S. declined 3.6% in the quarter ended April 26, the worst such performance in well over a decade and the second time in three quarters that the chain reported a decline in the key measure.

Net income declined 22.8% to $91 million, or $2.50 per share, well below Wall Street expectations of $3.07, according to the website Earnings Whispers. The company blamed the decline on lower income from company stores and supply chain operations. Company-operated stores’ same-store sales fell 10.5% in the quarter, compared with a 3.2% decline for franchisee-owned locations.

Revenues rose 2.8% to just over $1 billion.

“We faced a number of headwinds in the first quarter, from the omicron surge, to staffing shortages, to unprecedented inflation, which pressured our results,” Ritch Allison, who hands over the CEO job to Russell Weiner on May 1, said in a statement. “We are actively implementing strategies designed to address them. However, we expect some of these headwinds are likely to persist further into 2022.”

Domino’s sales challenges in the quarter led to a 1.4% decline in its U.S. retail sales growth, which includes revenue generated by all stores.

But operators did continue to build stores. The company opened 37 new locations in the U.S. in the quarter and another 176 internationally and now operates more than 19,000 global locations.

Still, the quarter presented challenges for Domino’s unlike any the company had seen in well over a decade, putting pressure on the company’s stock. Shares in Domino’s are down by a third so far this year, ending a run that began just after the Great Recession and took the share price from the low single digits to more than $500.

Allison announced his retirement earlier this year, handing over leadership to longtime executive Weiner while former CEO David Brandon will become the executive chairman.

The Ann Arbor, Mich.-based company has struggled more than other brands with a lack of drivers, which has hurt service at a time when competition for delivery orders remains fierce. The chain may also be seeing a normalization of demand for delivery as consumers have been out and about more often in recent months.

Domino’s same-store sales

Source: Company reports, SEC filings

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