Dominos Pizza Delivery Troubles Sales Plunge as Consumers Feel Price

Domino’s Pizza Delivery Troubles: Sales Plunge as Consumers Feel Price Pressure

Illustration of a pizza box with the chef turning his back and waving his hand.

Image: Brendan Lynch/Axios

Fees linked to price increases weigh on grocery delivery orders.

Why it matters: Rumors of a potential consumer pullback on delivery are beginning to surface, and the biggest players in the game – whose businesses have skyrocketed during the pandemic – are getting creative to lure customers as costs pile up.

Driving the news: Domino’s Pizza, which has more than 19,500 locations worldwide, sounded the alarm on Thursday, saying its delivery business was shrinking.

  • The company’s same-store delivery sales fell 6.6% in the fourth quarter. compared to a year earlier, when customers turned to “takeout, sit-down and comfort food,” Domino CEO Russell Weiner said on a conference call.
  • “We believe these dynamics will continue to pressure the delivery category near-term as long as consumer disposable income remains under pressure from macroeconomic factors,” he said.

And while Domino’s internal delivery strategy — it’s not opening up its business to third-party apps — has sparked issues different from those of its competitors, the drop in delivery has been anything but.

Using the numbers: According to NPD Group data provided to Axios, quick service restaurants like Domino’s saw an 11% drop in delivery orders in 2022.

  • According to Morning Consult, 15% of Americans placed food orders at least once a week in January 2023, up from 18% a year earlier.

Between the lines: The fall in shipments could be due to consumers hitting their inflation limit as shipment fees come on top of product price increases.

  • Domino’s said its U.S. prices rose 6.3% year over year in the fourth quarter.
  • “It’s more of a macro issue,” Siye Desta, an analyst at CRFA Research, told Axios. “There are additional fees and it costs more for consumers.”

The other side: However, the largest food delivery companies have yet to feel the pressure of household budgets.

  • DoorDash revenue rose 40% in the fourth quarter and total orders increased 27% year over year.
  • Uber Eats also saw growth in order frequency and monthly active platform customers, prompting CEO Dara Khosrowshahi to say earlier this month that “delivery remains steady.”

Yes but: Both DoorDash and Uber Eats are taking steps to attract customers with compelling value plays. Both offer discounted deals to new subscribers.

Something to see: How delivery services react to price sensitivity.

  • The segment benefited from a “COVID-driven pull-forward of this ordering method” in the early days of the pandemic, Bank of America analyst Sara Senatore wrote on Friday.
  • But that means the current outlook for supply growth is muted.

The bottom line: DoorDash shares soared last week following fourth-quarter results but have since lost a fifth of their value over the past five days amid broad market decline and concerns over supply demand.

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