By Anshi Sancheti, Juveria Tabassum and Waylon Cunningham
(Reuters) -Domino’s Pizza beat expectations for quarterly profit and U.S. same-store sales on Tuesday, driven by promotions and new menu items as consumers tighten their budgets amid economic uncertainty.
Persistent inflation and repeated menu price hikes have prompted consumers to prioritize value when dining out or ordering in, and move to smaller pack sizes for snacks.
Sales in the restaurant industry were beginning to slow, CFO Sandeep Reddy said on a post-earnings call. The company’s shares pared some premarket gains and were up about 3%.
“We think the timing of Domino’s fiscal quarter supported sales growth as the macro slowdown in restaurant spending has grown more acute in September,” said Matt Goodman, analyst at M Science.
Still, Domino’s efforts such as its $9.99 pizza offer, which was revived in August, and fresh items like parmesan-stuffed-crust pizza have helped cater to consumers who have curtailed spending, and drive demand.
Domino’s said it had stuck with the $9.99 pizza deal longer than it had planned as it helped drive demand at stores, and that it had been requested by franchisees.
CEO Russell Weiner told Reuters he expected franchisee profitability to increase over last year, in contrast with some chains that have become wary of broad discounts cutting into franchisee profits.
“We can have sustained value that’s profitable, unlike other folks who are probably spending away their balance sheet to keep up,” he said.
Its partnership with DoorDash was also helping attract more customers for food delivery, and would help boost sales in the U.S. through next year, Weiner said.
U.S. same-store sales for the world’s largest pizza chain rose 5.2% in the quarter, beating analysts’ expectations of a 4.0% increase, according to LSEG data.
Domino’s has been rolling out more deals under its rewards program as it faces rising competition from fast-food chains like McDonald’s and Burger King, which have introduced steep discounts to draw in diners.
A weaker point came in international same-store sales, where a 1.7% increase missed estimates of 1.9%, as demand remained choppy in markets such as Japan and Australia.
In August, Australia-based franchisee Domino’s Pizza Enterprises, which has markets from Asia to Europe, posted its first annual loss since going public two decades ago.
Weiner said Domino’s has been consulting the franchisee, which appointed its third CEO in the last one year and which represents a third of Domino’s business.
“They are really trying to turn around their business, particularly in France and Japan, and we’re working with them on it,” Weiner said.
Domino’s earnings per share for the quarter ended September 7 were $4.08, beating estimates of $3.97.
(Reporting by Anshi Sancheti and Juveria Tabassum in Bengaluru; Editing by Shilpi Majumdar and Leroy Leo)
