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Domino’s is preparing for a less-than-appetizing back half of 2024.
In its Q2 earnings report last week, Domino's reported 4.8% same-store sales growth, though it expects growth as low as 3% for the rest of the year. It also cut its plans for global expansion by 25%.
Domino’s did beat expectations for earnings per share in Q2. Its revenue rose 7.1% year over year to $1.1 billion for the quarter. Domino’s credited the revenue growth to higher supply chain revenue, greater order volumes, US advertising success, and franchise royalties and fees.
On the whole, though, it’s been a bumpy time for fast food. Price increases at many leading chains have far outstripped inflation over the past five years, according to analysis by FinanceBuzz, and customers appear to have cut back on spending in response. Investors are “concerned about the health of the sector,” the Wall Street Journal reported, observing that while Domino’s share price increased 21% in the past year, an S&P 500 restaurant sector subindex is down 8% over those 12 months.
Fast food chains have responded to the downturn with a slew of promotions. Likewise, Domino’s continues to offer “boost weeks” when pizzas are 50% off. CEO Russell Weiner said during an earnings call that the company has updated its loyalty program so that customers can earn points and free items more quickly. The loyalty program, coupled with “strong marketing programming,” is helping to increase transaction growth in US stores, CFO Sandeep Reddy added.
Weiner acknowledged that consumer spending is slowing, but noted that Domino had moredelivery and carryout orders this quarter, and saw growth across all income brackets.
“We’ve got some of the most balanced order count I’ve ever seen,” he said.
Global rollback: Although Weiner said orders are also up internationally, Domino’s is facing some troubles overseas. Australian-based “master franchisee” Domino’s Pizza Enterprises, which runs many stores in Asia and the EU, announced it would be shuttering “dozens of stores in Japan and France,” the Wall Street Journal reported. “The market is anxious about risk going forward that this type of headwind will spread to more markets beyond Japan and France,” Northcoast Research analyst Jim Sanderson said, according to Reuters.
As a result, Domino’s pared back its goal to open 1,100 net new stores this year, Reddy said, and Weiner specified that it now plans to open 825 to 925. But the company maintained its target of launching at least 175 new stores in the US each year between now and 2028.