Domino's Pizza missed Wall Street estimates for second-quarter revenue on Monday 24 July, as elevated delivery fees and higher prices to boost margins hurt demand for its pizzas and chicken wings.
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Shares of the world's largest pizza chain dropped 4% in pre-market trading on Monday 24 July as Domino's said it saw lower order volumes during the quarter.
Higher labour and raw material costs have forced restaurant chains, even the biggest names including McDonald's, to jack up menu prices and delivery fees, which hurt cost-conscious consumers whose budgets are already squeezed by sticky inflation.
Domino's U.S. same-store sales rose 0.1% in the second quarter, compared with analysts' estimates of an about 0.2% increase.
In a bid to boost its sluggish delivery business, the pizza maker partnered with Uber earlier in July, which will allow its customers to place order on the ride-sharing company's food delivery apps Uber Eats and Postmates.
The service will be rolled out in four pilot markets in the US in the fall.
"Over two-thirds of our stores around the world will have the ability to take orders from Uber Eats," Domino's CEO Russell Weiner said in a statement on Monday 24 July.
Domino's total revenue fell 3.8% to $1.02 billion in the three months ended 18 June, compared with analysts' estimate of $1.07 billion, according to Refinitiv IBES data.
Additional Information
But the fast-food chain reported a profit of $3.08 per share, above Refinitiv estimate of $3.05.
The above news followed the following alert, published on Wednesday 19 July:
DOMINO'S PIZZA SHARES UP 1% AFTER TWO BROKERAGES RAISE PRICE TARGET
All of the above news was followed by the following update:
UPDATE 3-Domino's Beats Profit Estimates As Costs Ease; Focus On Uber Eats Deal
Domino's Pizza on Monday 24 July beat Wall Street estimates for quarterly profit, supported by easing supply chain pressures and lower food costs including cheese even as demand remained pressured by still higher menu prices and delivery charges.
The company's shares reversed course from pre-market on Monday 24 July to trade up 2% as investors focused on the higher gross margins and the recently announced Uber Eats partnership.
Supply chain costs fell nearly about 6% to $548.6 million in the three months ended 18 June after largely weighing on earnings in recent quarters, lifting gross margin to 39.5% compared with 36.3% in the year-ago period.
Finance chief Sandeep Reddy said on a post-earnings call the delivery business will remain challenged in the third quarter but expects it to slightly improve with the rollout of an updated loyalty program in September and benefits from the Uber partnership.
Domino's, which became synonymous with quick home delivery around the world, earlier this month partnered with Uber to bolster the business by allowing customers to place orders on the ride-sharing company's food-delivery apps.
The service will be rolled out in four pilot markets in the US in the fall.
"The sluggish results help explain why Domino's is listing its menus on Uber Eats and Postmates to attract new customers," said Insider Intelligence's senior analyst Zak Stambor.
"Rather than sink money into digital marketing efforts, Domino's is going where the eyeballs are already looking," he added.
Revenue of $1.02 billion missed analysts' average estimate of $1.07 billion, while profit of $3.08 per share beat expectation of $3.05, according to Refinitiv data.
US same-store sales rose 0.1%, missing estimates of an about 0.2% increase.
Read More: Domino's Pizza Group Names New CEO
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