By Mehr Bedi and Deborah Mary Sophia
(Reuters) -Domino’s Pizza Inc fell short of quarterly sales estimates on Thursday, in a sign that price hikes were eating into demand for its pizzas and chicken wings amidst decades-high inflation, sending shares down more than 10% in early trading.
The world’s largest pizza chain, like other fast food companies, has raised prices of its menu items over the past year to counter elevated costs of transportation, labor and raw materials, a move analysts say could weigh on traffic.
Even with recent promotional offers, such as the 50% discounts on its pizzas for a limited time, Domino’s U.S. same-store sales missed expectations, as analysts also point to growing competition from rival Pizza Hut.
“For Domino’s, the fourth-quarter (U.S. same-store sales) weakness was disappointing, and it’s raising a bit of a red flag,” Northcoast Research analyst Jim Sanderson said, given that the company also expects softer sales going forward.
The Michigan-based company, which raised its dividend by 10%, has been facing acute staffing shortages, especially of delivery drivers at its U.S. stores, which has lengthened delivery times and further dented sales.
Like Domino’s, smaller rival Papa John’s also reported gloomy same store sales, coming in contrast with other fast food majors, such as McDonald’s Corp and Taco Bell owner Yum Brands Inc, who saw more customers turn to their stores in search of wallet-friendly meals.
Prolonged weakness in the U.S. delivery business, coupled with broader economic pressures, prompted Domino’s to trim expectations for global retail sales growth, excluding foreign currency impact, to between 4% and 8% over two to three years. It had previously expected growth of 6% to 10%.
Still, hiking menu prices by about 7%, as estimated by the company in October, helped Domino’s adjusted earnings of $3.97 per share top estimates of $3.94.
(Reporting by Mehr Bedi and Deborah Sophia in Bengaluru; Editing by Milla Nissi)
