As the restaurant industry aims to lure frugal consumers with discounts and deals, Domino’s Pizza
“I think the industry headwinds are actually tail winds for us. Meaning, of course, they’re headwinds, but we’re going to gain [market] share during this time frame,” CEO Russell Weiner told CNBC on Monday.
Domino’s on Monday reported second-quarter U.S. same-store sales growth of 3.4%, topping StreetAccount estimates of a 2% increase. The chain’s first-ever stuffed crust pizza, which was introduced in March, boosted sales, but so did the deals Domino’s offered. Executives said that Domino’s grew sales across all income cohorts, including low-income customers, bucking the industry trend.
“We’re able to lean into value in the things that people want value on,” Weiner said, naming Domino’s $9.99 “Best Deal Ever” promotion as one example.
“The reason it’s the best deal ever is because everybody else right now is giving you a deal on something you don’t want, something that may be your second choice,” he added.
Fast-food restaurants, from McDonald’s to Yum Brands’ KFC, have been promoting value menus and combo meals for more than a year to combat sluggish traffic. While fast-food chains typically see consumers trade down to their cheaper meals during times of economic hardship, diners faced with years of high inflation have been opting to eat at home — or spend on what they really think is worth their dollars.
Look no further than the recent success of Chili’s, which has posted double-digit same-store sales growth over the last four quarters. After investing in its operations and menu, Chili’s promoted its food by comparing its pricing to that of fast-food rivals; for just a few dollars more, customers can get the full dine-in experience.
Weiner said he sees a parallel to Domino’s business.
“This is something systemic,” he said. “Until people’s wages get back to the point where they’re outgrowing pricing, this is going to stay. I think that’s why you’re seeing what you’re seeing at Chili’s, but that’s why you’re going to see the positive stuff that you’re seeing in Domino’s.”
Still, Domino’s has its challenges. If prices are too high for Domino’s delivery customers, they’ll eat at home instead.
“We’ll lose an occasion, not to a competitor, but to an eating at-home occasion,” Weiner said.
The pizza chain’s earnings also missed Wall Street’s expectations, hurt by a $27.4 million charge from its investment in its China licensee. The company posted earnings of $3.81 per share, compared with estimates of $3.95, according to consensus estimates from LSEG. Revenue met Wall Street estimates of $1.15 billion.
Shares of the company fell more than 2% in afternoon trading on Monday.
Domino’s rivals aren’t expected to share their second-quarter results for several more weeks. Pizza Hut-owner Yum Brands won’t report its earnings until Aug. 5, followed by Papa John’s on Aug. 7.
