Domino’s has experienced a slowdown in sales during the latest quarter, reflecting a wider decline in pizza demand as consumers become more budget-conscious.
Even though the world’s largest pizza chain surpassed analysts’ expectations for both profit and revenue, its stock fell over 4% on Tuesday after signaling a forecast of reduced growth for the remainder of the year. Same-store sales saw only a modest increase of 0.3% in this quarter.
Global retail sales growth for the quarter dipped to 3.2%, a significant drop from the 6.3% growth recorded the previous year.
Interestingly, pizza has now fallen to the seventh spot among the most popular foods in the U.S. in terms of sales, a decline from being the second most-consumed food back in the 1990s, according to Technomic, which analyzes trends in the food and restaurant industry.
Mexican cuisine has surpassed pizza to become the sixth most popular food based on overall spending, as reported by the research firm.
David Henkes, a senior principal at Technomic, noted that “it’s a perfect storm for pizza as consumer tastes shift.” He mentioned that around 9% of Americans are now prescribed GLP-1 drugs for health reasons.
He added, “This year, pizza is projected to have the slowest growth among all major cuisine types, including burgers and Asian food.”
During a recent earnings call, Domino’s new CEO, Joe Jordan, emphasized the need to adapt to changing consumer expectations, stating, “Growth will come from understanding those changes and meeting customers where they are.”
In line with this, Domino’s introduced The Domino, a smaller, individual pizza option, but the reception has been mixed. Bloomberg Intelligence analyst Michael Halen suggested that the lower-priced pizzas could have contributed to a decrease in the average transaction size.
In the broader pizza market, several independent chains, like Pieology Pizzeria and Bertucci’s Brick Oven Pizza and Pasta, sought bankruptcy protection last year.
On the other hand, larger franchises such as Pizza Hut and Papa John’s are currently undergoing significant changes. Yum! announced in June that it had agreed to sell Pizza Hut to a private equity firm for $2.7 billion.
Papa John’s is reportedly facing a major overhaul, planning to close hundreds of locations next year, and is said to be considering a private equity bid to take the company private. Meanwhile, Papa Murphy’s, under MTY Food Group, is also looking into a potential sale while also closing up to 50 stores this summer.
