Domino's Sales Growth Slows Amid Broader Decline in Pizza Demand
The pizza giant's recent quarterly sales showed a minimal increase, reflecting a larger trend of consumers cutting back on discretionary spending and shifting food preferences.
Domino's experienced a slowdown in sales growth during its most recent quarter, a trend attributed to a wider decline in pizza demand as consumers face economic pressures. While the company surpassed Wall Street's profit and revenue expectations, its shares fell more than 4% after it forecast slower growth for the remainder of the year. The company reported a modest 0.3% rise in same-store sales for the quarter.
Global retail sales growth also decelerated to 3.2%, a notable decrease from 6.3% recorded a year ago. According to Technomic, a firm that tracks food and restaurant trends, pizza has fallen to seventh place in terms of U.S. sales popularity, down from second place in the 1990s. Mexican cuisine has now surpassed pizza as the sixth most popular food category by spending.
David Henkes, senior principal at Technomic, described the situation as a "perfect storm for pizza as consumer tastes shift." He also noted that approximately 9% of Americans are using GLP-1 drugs for health reasons, which may impact dietary choices. "Pizza will be the lowest growing cuisine type of all other major cuisine types including burgers and Asian food this year," Henkes added.
During an earnings call, Domino's new CEO Joe Jordan acknowledged the evolving consumer landscape, stating, "As consumer expectations evolve, growth will come from understanding those changes, meeting customers where they are." The company's introduction of "The Domino," an individual, lower-priced pizza, reportedly had mixed results and may have contributed to a decrease in the average check size, according to Michael Halen, an analyst at Bloomberg Intelligence.
The challenges in the pizza market have led to financial difficulties for some smaller chains. Last year, at least three independent chains, including Pieology Pizzeria, Anthony Coal Fired Pizza & Wings, and Bertucci’s Brick Oven Pizza and Pasta, filed for bankruptcy protection. Larger chains are also undergoing significant shifts. Yum! announced in June an agreement to sell Pizza Hut for $2.7 billion. Papa John's, which plans to close hundreds of restaurants, is reportedly considering a private equity buyout, while Papa Murphy's, owned by MTY Food Group, is exploring a potential sale. MTY Food Group announced earlier this summer that it would close up to 50 Papa Murphy's locations.