Although Domino’s Pizza reported nearly stagnant same-store sales growth of 0.1% for the second quarter ended June 18, 2023, the numbers were not surprising for a company that is focusing on rebuilding its delivery growth, Domino’s Pizza CEO Russell Weiner emphasized Monday.
After dominating the industry during the pandemic, Domino’s has been struggling for several quarters now with rising costs, labor challenges, and being able to keep up with demand. Now, with a recently announced partnership with Uber Eats (the first delivery partnership for the traditional delivery-focused pizza brand) and the promise of an updated loyalty program this fall, Domino’s is planning out a roadmap for the future.
“Efforts to improve service and staffing and drive value and innovation will continue to make a difference, driving order counts in this important segment of our business,” Russell Weiner said during Monday’s earnings call. “Our delivery service levels ended Q2 nearly two minutes better than Q2 of last year. And with the agreement we recently announced with Uber Eats, Domino's will benefit from a large and growing cohort of delivery customers. We believe these transactions will be incremental and provide a meaningful increase in the number of customers who leverage the Domino's delivery experience.”
The other key aspect of Domino’s optimism for the future is that the company is facing fewer cost pressures as inflation has cooled off slightly. Supply chain pressures have eased and food costs aren’t as debilitating as they had been in recent quarters, though the company continues to take pricing of between 2-4% to offset any lingering challenges.
“Our momentum will build starting in Q4 and will significantly impact the performance of our business in 2024 and beyond,” Weiner continued. “Our Mix & Match offer at $6.99, remains a strong value for customers and has helped our franchisees accelerate store-level profitability through Q2. That profitability is higher than it was this time last year despite inflationary headwinds. And I expect it to continue to grow as a result of the sales building initiatives.”
The big news coming from Domino’s, of course, is the company’s surprise partnership with Uber Eats. Domino’s hung on for years as one of the last remaining holdouts to only offer first-party delivery, but over the past several quarters, that differentiation had begun to handicap the company more than helped it, as competitors like Papa Johns and Pizza Hut relied on their third-party delivery partnerships to help keep up with high demand and low staffing.
The long-term goal is to have Domino’s available on Uber Eats in 70% of Domino’s stores around the world, which CFO Sandeep Reddy anticipates will begin having an impact on business after the third quarter. But the company is still emphasizing the importance of direct delivery and noted that the best deals will still be available through Domino’s direct ordering, and that the company will still maintain control over customer data even with Uber Eats orders.
Domino’s is also relaunching its loyalty program in September, as the company joins the larger restaurant industry trend of adding more value to loyalty points and lowering the threshold for redeeming points.
“It’s clear in the long term that order counts drive franchisee profitability, so [the loyalty program] will continue to be a transactions-based program,” Weiner said during Monday’s call. “The biggest change is we will allow people to transact at a lower level. We think this is really important, bringing in incremental frequency into the program. Today, you need to get 60 points, in the future, you'll be able to still get a pizza of 60 points, but at lower value with different products you'll still be able to participate. We think that'll be a nice driver of order.”
Besides a focus on improving delivery experience and options, and adding incrementality to the loyalty program, Domino’s also announced Monday a new menu innovation. In late August, the pizza chain will be debuting pepperoni stuffed cheesy bread—which Domino’s anticipates will be another hit with customers following the success of Domino’s loaded tots, which was added to the menu in February.
Domino’s revenues for the second quarter of 2023 decreased $40.6 million or 3.8%, as compared to the first quarter of 2022, attributable to lower supply chain revenues. Net income increased $6.9 million to $109.4 million or $3.08 diluted earnings per share for the second quarter of 2023 as compared to $2.82 in the second quarter of 2022. Domino’s opened 197 net new stores in the second quarter for a total store count of 20,205 restaurants systemwide.
Contact Joanna Fantozzi at [email protected]