Domino’s Pizza continues to have a people problem

ANN ARBOR, MICH. – When much of your business model is based on delivery, not having enough people to deliver the product is a problem. That, in a nutshell, is one of the significant problems facing Domino’s Pizza, Inc.

The lack of people to deliver pizzas creates a good news, bad news situation for the company. The good news is carryout sales grew nearly 15% during the second quarter, creating a runway for future opportunity, said Sandeep Reddy, chief financial officer. Mr. Reddy spoke July 21 during a conference call to discuss second-quarter results.

The bad news is the driver shortage is having a real impact on the company. Domino’s breaks out its US stores into quintiles based on staffing levels relative to a fully staffed store. During the second quarter, sales at stores in the top 20%, those that are considered fully staffed, were 7% higher than stores in the bottom 20%. The only positive is the gap between the top and bottom quintile stores was 12% during the first quarter.

“We continue to navigate the labor market in the US, especially for delivery drivers,” said Russell J. Weiner, chief executive officer and chief operating officer.

Domino’s net income for the period ended June 19 was $102.5 million, equal to $2.82 per share on the common stock, and down when compared with the same period of the previous year when the company earned $116.6 million, or $3.06 per share.

Quarterly sales ticked up to $1.06 billion from $1.03 billion the year before.

“I can assure you that nobody at Domino’s is happy with our recent performance,” Mr. Weiner said.

Same-store sales in the United States fell 3% during the quarter when compared with the previous year.

“The decline in US same-store sales in Q2 was driven by a decline in accounts, which continue to be pressured by the challenging staffing environment, which had certain operational impacts such as shortened store hours and customer service challenges in many stores, both company-owned and franchise, along with tough COVID and stimulus fuel comps,” Mr. Reddy said.

Efforts to remedy the operational challenges include promotions to drive carryout traffic, flexing store hours so they are closed at non-peak time, and utilizing call centers to take phone orders and free store staff to filling carryout and delivery orders.

Mr. Reddy added that the pace of US store growth may decelerate from the “current four-quarter run rate” of 3% due to supply chain, staffing and inflationary headwinds. International store growth was 9% during the quarter.

For the first six months of fiscal 2022, Domino’s Pizza earned $193.5 million, or $5.32 per share, down from the year prior when the company earned $234.4 million, or $6.06 per share.

Sales for the period were $2.08 billion, up from $2.02 billion for the first six months of fiscal 2021.