MW Domino's earnings missed on everything. Here's why the quarter was still a win.

By James Rogers

Domino's Pizza saw carryout sales increase but delivery sales fall, a sign its low-income customers are still hurting the most

Shares of Domino's Pizza Inc. took a hit Monday following the restaurant chain's triple miss of an earnings report, with the fast-food market proving tougher than originally expected.

The company may have missed Wall Street expectations for profit, revenue and same-store sales, or sales of stores open at least a year, but because it managed to outperform its competition during a challenging fast-food environment by offering deals, it will mark the fourth quarter as a win.

"We believe the QSR [quick-service restaurant] brands that offered the strongest value would win," Chief Executive Russell Weiner said during the post-earnings call with analysts, according to an AlphaSense transcript. "And we made the right call to focus on this, as we've seen more market headwinds than anticipated at the time."

Read: McDonald's new McValue menu foreshadows cheaper fast food elsewhere - and more struggles for chains, analyst says

In the U.S., Domino's said its share of the fast-food pizza market increased by 1% in 2024, which was about what it was averaging in annual market-share growth about 10 years ago.

The stock $(DPZ)$ slipped 0.8% in afternoon trading but had been down as much as 6.8% at its intraday low, hit soon after the open.

Among the ways Domino's delivered on its value pledge was through its Emergency Pizza promotion, in which qualifying purchases could earn a free pizza within a 30-day window, and through its customer "tipping promotion," in which delivery customers who tipped delivery drivers at least $3 would receive a $3 coupon.

"In 2025, Domino's will give customers what they are demanding from QSR brands - more value," Weiner said.

He said customers can expect a "similar cadence" of promotions and value deals, as 2025 is expected to be "another challenging year" for the industry.

Separately, Chief Financial Officer Sandeep Reddy said on the earnings call that the results and outlook provided on Monday don't include any potential impacts from tariffs proposed by the Trump administration.

Reddy said Domino's sources most of its food products from within the U.S., "so we are not expecting this to have a meaningful impact if tariffs are put in place."

Domino's fourth-quarter results miss on all three key metrics

For the fourth quarter, the company said U.S. same-store sales grew 0.4% from a year ago, but that was well below the FactSet consensus estimate for 1.1% growth.

Within those results, carryout sales grew 3.2% while delivery sales dropped 1.4%. The company said the weakness in delivery sales was a result of continued economic and inflation pressures that hurt its low-income customers the most.

And the higher carryout-to-delivery sales mix weighed on profitability, because the company makes more money on deliveries.

Net income for the latest quarter rose to $169.4 million, or $4.89 a share, from $157.3 million, or $4.48 a share, in the same period a year ago. That missed the average earnings estimate of analysts surveyed by FactSet of $4.90 a share, to snap an eight-quarter streak of beats.

Total revenue increased to $1.44 billion from $1.40 billion, amid higher food-basket pricing to stores and a rise in advertising revenue, but missed the FactSet consensus of $1.48 billion.

On the bright side, Domino's raised its dividend by 15%, to $1.74 a share from $1.51 a share. Shareholders of record on March 14 will be paid the new dividend on March 28.

Based on current stock prices, the new annual dividend rate implies a dividend yield of 1.52%, compared with the yield on the Consumer Discretionary Select Sector SPDR exchange-traded fund XLY of 0.74% and the implied yield for the S&P 500 index SPX of 1.27%.

Domino's shares have tacked on 1.2% over the past three months, outpacing the consumer discretionary SPDR ETF's 0.3% gain and the S&P 500's advance of 0.8%.

-James Rogers

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February 24, 2025 15:01 ET (20:01 GMT)

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