Domino's Pizza Inc reported a quarterly profit that fell short of Wall Street expectations due to rising prices and a shortage of workers. The company hoped to capitalize on the rising demand for pizzas and chicken wings.
Since Russia invaded Ukraine, the biggest pizza company in the world has had to spend more money on everything from grains to oil. This adds to the problems of a company that was already having trouble with rising freight and labor costs.
Even though they tried to make up for it by raising delivery costs and menu prices, Domino's gross margin fell from 39.56% in the second quarter of 2016 to 36.3% in the second quarter of 2017.
According to Refinitiv IBES data, analysts expected the Michigan-based company to earn $2.91 per share in profits. Instead, the company made $2.82.
According to Jim Sanderson, an analyst at Northcoast Research, the findings highlight the widespread nature of inflation. Sanderson also said that price pressures might not go away even if commodity inflation slows down from where it was in the first half of 2022.
The pizza delivery industry's forerunner experienced a drop in profits due in part to a shortage of drivers. Sandeep Reddy, the company's CFO, reported an 11.7 percent drop in sales from delivery orders during the quarter. However, this was still an increase of 8.2 percent over the same period before the pandemic.
Reddy said that the U.S. store growth rate might stop this year if supply chain, labor, and inflationary pressures don't ease.
Due to the shortage of drivers, Domino's has had to offer discounts and increase its carryout menu. Even after a two-year hiatus, the firm has brought back "boost week," during which online purchases are discounted by 50%. But Sanderson from Northcoast Research warns that if consumers start cutting back on spending, those discounts might hurt profits.
Domino's U.S. same-store sales declined 2.9% in the quarter ending June; this was lower than the -4.81% drop forecast by industry analysts.