ANN ARBOR, MICH. โ The share price for Dominoโs Inc. on the New York Stock Exchange fell 12% on Feb. 23, the day the Ann Arbor-based pizza chain gave results for the fiscal year ended Jan. 1. The drop in price came after delivery US same-store sales in the fourth quarter declined by nearly 7% compared to the previous yearโs fourth quarter.
Executives at Dominoโs are studying dynamics that affect Dominoโs and the broader restaurant category, said Russell J. Weiner, chief executive officer, in a Feb. 23 earnings call.
โFirst, as consumers returned to many of their pre-COVID eating habits, some of the sit-down business that was a source of volume for restaurant delivery orders returned to that channel,โ he said. โSecond, inflation impacted delivery due to the added expenses of fees and tips in that channel. Our research shows that a relatively higher delivery cost during inflationary times leads some customers to prepare meals at home instead of getting them delivered. We believe this dynamic will continue to pressure the delivery category in the short term as long as consumersโ disposable income remains pressured by macroeconomic factors.
โDespite these pressures, US delivery sales for Dominoโs in 2022 were more than ($500 million) higher than the pre-COVID baseline in 2019.โ
US same-store sales declined 0.8% in the fiscal year while international same-store sales, excluding the impact of foreign currency, increased 0.1%. Net income fell 11% to $452.3 million, or $12.53 per share on the common stock, from $510.5 million, or $13.54 per share, in the previous fiscal year. Revenues increased 4.1% to $4.54 billion from $4.36 billion.
Dominoโs stock price on Feb. 23 closed at $307.86 per share, down from a close of $348.46 on Feb. 22. The share price on Feb. 24 closed at $297.47, the first time it had been under $300 since a previous 52-week low of $299.41 on Oct. 12, 2022.
Executives of Dominoโs lowered the companyโs two-to-three-year outlook due to economic headwinds impacting the US delivery business in particular. The outlook, excluding the impact of foreign currency, now calls for 4% to 8% global retail sales growth, down from a previous outlook of 6% to 10%, and global net unit growth of 5% to 7%, down from 6% to 8%.
Mr. Weiner said staffing issues have improved, which should help the delivery business. Hires at corporate stores have returned to levels before COVID-19.
โTurnover is down,โ he said. โJob applications are up, and weโre getting people through the system faster on applications.โ
Dominoโs-owned electric delivery vehicles could provide another boost.
โSo we have an EV fleet of 800 vehicles, but that actually is part of a larger kind of strategic shift youโre starting to see with our franchisees and corporate stores in purchasing vehicles, and what that enables us to do, is attract folks whoโve got driverโs licenses but maybe donโt have access to vehicles,โ Mr. Weiner said.
Carryout comprises about half of Dominoโs orders and 40% of the sales in the United States, Mr. Weiner said. In the fourth quarter, US carryout same-store sales were up 14% when compared to the same time of the previous year.
โIf it were a company of its own, Dominoโs carryout would be counted amongst the top 20 QSR brands in America based on consumer spending obtained by NPD for the year ending December 2022,โ Mr. Weiner said. โTo support the growth of the business, we opened a new supply chain center in Merrillville, Ind., in September. As you know, we have invested significantly in our supply chain, opening four new centers since 2018.โ
In the fourth quarter, US same-store sales increased 0.9% while international same-store sales, excluding the impact of foreign currency, increased 2.6%. Net income of $158.3 million, or $4.43 per share on the common stock, was up 1.7% from $155.7 million, or $4.25 per share, in the same time of the previous year. Revenues in the quarter increased 3.6% to $1.39 billion from $1.34 billion.
