A Domino's location in London, on March 4, 2023.Henry Nicholls/Reuters
Domino’s Pizza DPZ-Q on Monday posted a surprise decline in first-quarter same-store sales in its biggest market, as elevated inflation and economic uncertainty hit consumer appetite for restaurant food.
Restaurant traffic slowed in February and March as consumer sentiment weakened, mainly due to President Donald Trump’s erratic trade policy, which has fanned fears of a recession in the United States.
The company’s U.S. delivery business also took a hit as lower-income consumers tempered spending, executives said on a post-earnings call.
The world’s largest pizza chain’s same-store sales in the U.S. fell 0.5 per cent, compared with analysts’ average estimate of a 0.5 per cent rise, according to data compiled by LSEG.
Shares of the company fell about 1 per cent in early trading.
Domino’s reiterated its 3 per cent annual growth target for U.S. comparable sales, but said if the current economic uncertainty persisted, it could prevent the company from achieving its target.
Despite a tough and competitive environment, Domino’s is “well positioned to shift to positive comparable sales in the US in the second half of the year,” said Northcoast Research analyst Jim Sanderson.
The company expects demand to pick up in the second half of the year, helped by its partnership with DoorDash that will allow users to place orders through the aggregator platform once the service kicks off in May, and its newly launched parmesan-stuffed crust pizza.
However, geopolitical volatility could hit international demand and impact the company’s annual global comparable sales growth target of 2 per cent, executives said.
For the first quarter ended March 25, Domino’s posted earnings per share of $4.33, ahead of analysts’ average estimate of $4.07.
U.S. company-owned store gross margin fell to 16 per cent from 17.5 per cent a year ago, hurt by higher food prices.
International same-store sales jumped 3.7 per cent, beating analysts’ estimate of 1.93 per cent growth.