Domino’s same-store sales rose 4.8% in the second quarter, the company said on Thursday, as the brand generated “profitable order count growth” in both carryout and delivery.
That was not nearly enough for Wall Street. Investors hammered the stock in early-morning trading, sending it down 14% on Thursday.
The issue: Revenues missed expectations slightly. But the company also issued a warning on projections for store openings this year.
Problems with the master franchisee Domino’s Pizza Enterprises (DPE), which has encountered issues in the Middle East and Asia over the Israel-Palestine conflict, led the company to say it would fall short of store count projections. The operator is having challenges with both store openings and store closures.
Domino’s said it would fall 175 to 275 stores below its goal of at least 925 net store openings this year. The company said that it is “partnering closely with DPE as they work through this process.”
Domino’s also said it is “temporarily suspending” its guidance for at least 1,100 new stores until the impact of DPE’s issues are known.
The issues with Domino’s Pizza Enterprises are hardly unique—several major U.S. chains are having problems in the Middle East, including McDonald’s and Starbucks. McDonald’s, for instance, bought out its Israeli operator in April.
But the warning for Domino’s was particularly severe, cutting back its global store openings projections by about a quarter.
The results are overshadowing Domino’s U.S. comeback. The company struggled with weak sales starting in late 2021 as persistent labor shortages hurt service and then competition from third-party delivery ate into its market.
But the brand’s sales have improved lately, thanks to marketing efforts such as its “Emergency Pizza” buy-one, get-one offer and its continued focus on carryout.
Company executives said on Thursday that the company’s Domino’s Rewards loyalty program, which was upgraded last year, helped drive customer counts last quarter. Active members of the program were up “significantly” in the period and Domino’s is also getting more redemptions.
In addition, executives said that two “boost weeks,” in which the company offers 50% off online orders for a week, drove traffic in the period.
“For the second straight quarter, we drove U.S. comp performance in the healthiest way possible, through profitable order count growth,” CEO Russell Weiner said in a statement. “We had positive order counts in our delivery and carryout businesses, and across all income cohorts.”
Weiner on Domino’s second-quarter earnings call Thursday said that the company’s U.S. store pipeline is “strong and growing,” with 175 or more new stores expected to open every year through 2028.
He also said that the company’s operators in China and India are on track to reach growth potential.
UPDATE: This story has been updated to include some additional information from the Domino’s earnings call. It has also been changed to update the stock price.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.