The Home Cooking Trend Is Hurting Domino's Pizza Delivery

Inc. Domino's Pizza DPZ -11.65% claimed that because people are cooking their own food at home to save money, it has hurt its U.S. delivery business.

‍

The international pizza giant on Thursday announced fourth-quarter sales that fell short of analysts' expectations and slashed its two- to three-year sales guidance, citing ongoing difficulties with its U.S. delivery operation. For its American operation, Domino's depends on delivery sales.

‍

"We expect this dynamic will continue to pressure the delivery category in the short run as long as consumers' discretionary income remains challenged," Chief Executive Russell Weiner said during a call with investors on Thursday.

‍

According to Trade Algo, Domino's U.S. same-store sales for the three months ending January 1 increased by 0.9%, less than the 4% analysts had predicted.

‍

The stock of the Ann Arbor, Michigan-based business dropped $40.60, or 12%, to $307.86 on Thursday.

‍

Once the Covid-19 outbreak struck in 2020, pizza businesses saw an increase in sales as customers sought refuge at home. But, as restaurants have reopened and Consumers have generally resumed prepandemic behaviors, pizza sales for leading brands have leveled off.

‍

Given the general state of the economy's fragility, Domino's said it anticipates consumers will continue to save money by eating at home and is promoting its less expensive pickup business. According to Domino's, delivery currently accounts for about half of all orders. The business has launched promotions where consumers can pick up their orders with a $3 tip.

‍

A lack of pizza delivery drivers plagued restaurant chains last year, losing businesses money and aggravating customers with extended wait times. Workers claimed that over the past year, rising gasoline and car maintenance expenses made the job less enticing, and that the frequently strict hours of pizza businesses made it more difficult for them to compete with food delivery services like Uber Technologies Inc.'s Uber Eats.

‍

When demand is high, several pizza chains collaborate with food delivery services to have an adequate number of drivers on hand.

‍

Internationally, Papa John's Inc. Thursday stated that staffing levels and wait times at their restaurants have increased during a fourth-quarter earnings call with investors. According to Papa John's, using the applications helps their company. 

‍

Also down on Thursday, Papa John's shares slid 6.83% to $86.04. The chain reported reduced sales and profits for the fourth quarter. The business claimed that increasing labor costs and food expenditures, notably cheese costs, had a negative impact on operating margins. The corporation stated that both costs should decrease this year.

‍

Domino's hasn't used the delivery apps in the US, and executives said to investors on Thursday that they are still working to enhance its internal to-go operations. To assist in attracting drivers who don't want to use their own automobiles, the corporation purchased 800 electric vehicles to distribute to U.S. outlets. 

‍

The business reported on Thursday that a few franchisees are now investing in vehicles to recruit drivers on their own, which is aiding in the recruitment of a fresh group of workers. According to Mr. Weiner, "it truly is a part of a wider strategic shift."

‍

Although delivery times have decreased from the previous year, according to Domino's, they have still not returned to pre-pandemic standards.

‍

The company reported earnings of $158.3 million, or $4.43 per share, for the fourth quarter, up from $155.7 million, or $4.25 per share, in the same time last year. According to Trade Algo, analysts predicted earnings of $3.96 per share.

‍

According to Trade Algo, revenue increased 3.6% to $1.39 billion, falling short of Wall Street analysts' $1.44 billion forecast.

‍

When accounting for the effects of currency translations, Domino's reduced its multiyear retail sales growth outlook by 2 percentage points, to a range of 4% to 8% growth. Also, it cut its global advice for new restaurant openings.

‍

The business stated that it anticipates fiscal 2023 results to fall near the lower half of the forecasted ranges for both revenue and unit growth.