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How Domino's plans to address its pizza problems

Posted at 12:08 PM, Feb 23, 2023

(CNN) -- Domino's delivery problems aren't over.

In the last quarter of 2022 sales at locations open at least a year ticked up just 0.9% in the United States, below analyst expectations. Shares plunged about 11% on Thursday following the results.

"We experienced significant pressure on our U.S. delivery business in 2022," CEO Russell Weiner wrote in a statement discussing financial results Thursday.

In the fourth quarter, deliveries at stores open at least a year fell 6.6% compared to the same period last year, CFO Sandeep Reddy said during an analyst call Thursday.

The company expects the problem to continue this year. With inflation still high, customers might think that delivery fees, which are set by local stores and franchises, just aren't worth it.

"As we saw in the last recession, delivery moves with the economy, especially for customers with lower disposable income, who represent a significant portion of our business," Weiner said.

"Every day, delivery customers will be deciding where to spend their hard-earned dollars. So we need to maintain value and continue to improve our service." Weiner noted that while service times have improved, "they're not better than they were in 2019, and that's a place we need to go."

The pizza chain blamed sluggish sales on a shortage of delivery drivers early last year.

To address the problem, it looked at some solutions like using external call centers, to free up employees for delivery during peak hours and ways of incentivizing people to skip the delivery, and order items to go instead. Early last year, Domino's offered customers a discount for picking up orders rather than getting them delivered.

And it raised the price of its "mix and match" deal for delivery orders, but not carryout.

Today, about half of the chain's orders are made for pickup, according to the company.

And while staffing has improved somewhat, "there is more work to do on staffing that part of the business," Weiner said of delivery.

And Domino's is not the only pizza chain that reported slow growth in the fourth quarter.

Papa John's, which also reported results on Thursday, said sales at its stores open at least a year grew 1% in the fourth quarter. Its stock was down about 7% Thursday morning.

Over the summer, Papa Johns introduced pizza bowls, a new menu item it thought might help an industry-wide "pizza fatigue."

"There's a general thought that there could be a little bit of pizza fatigue," Scott Rodriguez, SVP of menu strategy and innovation at Papa John's said at the time. "Because that's all we've had for the last couple of years."

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