Domino’s Pizza Inc. DPZ recorded its first decline in U.S. same-store sales in 41 quarters, which the company’s chief executive attributed to a shortage of workers.
What Happened: The company’s U.S. same-store sales declined by 1.9% year-over-year, according to its third-quarter earnings data. Same-store sales for U.S. company-owned stores fell 8.9% year-over-year, although sales for its international stores rose 8.8% over the same period.
In the company’s earnings call, CEO Richard Allison attributed this decline to labor shortages at its U.S. stores.
“We saw more pronounced staffing challenges across the country, resulting in reduced operating hours and service challenges in a number of stores across the network,” he said. “We believe these challenges posed a more significant headwind on orders and sales during the third quarter than they did during the first half of this year.”
Allison added that the situation is not a quarterly anomaly, but plays a role in “how we think about the business going forward – the staffing challenges do impact our ability to be more aggressive, as it relates to promotional activities in the marketplace.”
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What's Next: Allison stated the company and its franchisees have begun to explore strategies to address this concern.
“A new applicant tracking system rolled out a few weeks ago that will make it easier for candidates to apply for openings and to be onboarded at both corporate and franchise locations across our U.S. system,” he said. “We are also sharing operational best practices to eliminate unnecessary time-consuming tasks in the operation of stores, like pre-folding boxes, for example. They can drive both team member and customer satisfaction.”
For the company-owned stores, Allison said Domino’s has enabled “implemented meaningful increases in team member compensation and are also piloting new approaches to team member onboarding, training and development.” Domino’s is also moving to carside deliveries as a means of time- and cost-efficiency.
“In the future, I don’t see why drivers should ever get out of their cars,” he said. “They’d be maximizing deliveries per hour and wages they earn.”
Still, Allison acknowledged a quick fix to Domino’s labor problems is elusive and lamented that “staffing may remain a significant challenge in the near term as the labor market continues to evolve.”
For the quarter, Domino's sales growth of 3.1% year-on-year, to $997.99 million, lower than the analyst consensus of $1.04 billion, although its earnings per share of $3.24 beat the analyst consensus of $3.11.
DPZ Price Action: The stock gapped lower Thursday morning to the $459 area and recovered to trade as high as $488.32 before closing at $477.89.
Photo: Erica Fisher / Flickr Creative Commons.
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