Intense pizza competition is slowing Domino’s growth
Domino’s stock slumped about 6% before the market opened on Tuesday, after it reported quarterly earnings results that disappointed investors — again.
The results may be a sign that Domino’s efforts to boost sales by aggressively opening up new locations and using buzzy promotions to showcase its tech aren’t working well enough. Domino’s sales also underwhelmed Wall Street investors in the first quarter of the year.
Competition among its main rivals, Pizza Hut and Papa John’s, is fierce. And upstarts like the fast-casual pizza chains Blaze and MOD are gaining attention. Plus, Domino’s is also facing pressure from the broader industry: While pizza chains used to be the main delivery option for consumers, today more food chains are trying to woo customers with delivery.
Still, Domino’s is the largest pizza company in the world based on sales, and it’s growing. The chain reported that US company-owned restaurants open at least a year grew 2.1% in the second quarter.
But analysts expected that figure to be closer to 3.2%, according to institutional broker estimates from Refinitiv. At this time last year, sales at those stores grew 5.1%.
The company also posted slower-than-expected sales growth of 3.1% at its US franchise locations open at least a year. Analysts expected that figure to be about 4.7%, per Refinitiv. At this time last year, that number was 7%.
Domino’s also missed its revenue expectations of $836.6 million, instead bringing in $811.6 million for the quarter. That marks a 4.1% increase from the same period last year. Domino’s attributed the growth to the new locations it has opened in recent quarters.
During the second quarter of this year, the company opened 200 new stores, 42 of them in the United States.
The chain has been opening new locations at a rapid pace to help boost sales. It opened its 16,000th location in March, and it has grown by nearly 50% over the past five years. Domino’s plans to add another 2,350 stores in the United States by 2028.
At this time the company still has fewer stores than one of its main rivals, Pizza Hut, which has more than 18,000 locations globally. Papa John’s has about 5,000 restaurants worldwide.