Domino’s Pizza (NYSE: DPZ) reported a challenging fourth-quarter earnings performance, missing Wall Street expectations on profit, revenue, and same-store sales. Despite these setbacks, the company managed to strengthen its market position by focusing on value-driven promotions that resonated with budget-conscious consumers.
Carryout Growth Offsets Declining Delivery Sales
While overall U.S. same-store sales rose by 0.4%, they fell short of the estimated 1.1% growth expected by analysts. The disparity was driven by a 3.2% increase in carryout orders, contrasted by a 1.4% decline in delivery sales. The dip in delivery performance reflects ongoing economic pressures, particularly among low-income customers facing inflation-related financial strains.
Earnings and Revenue Miss Analyst Estimates
Domino’s posted a net income of $169.4 million, or $4.89 per share, slightly below the FactSet consensus of $4.90 per share. This marked the end of an eight-quarter streak of exceeding earnings expectations. Total revenue increased from $1.40 billion to $1.44 billion, but still fell short of the $1.48 billion analysts had projected.
A higher mix of carryout orders also impacted profitability, as Domino’s earns more per order on deliveries. The shift in consumer behavior highlights the broader economic challenges affecting discretionary spending habits.
Value-Driven Promotions Fuel Market Share Gains
Despite missing estimates, Domino’s outperformed competitors in the fast-food sector by leveraging strategic promotions. Initiatives such as the Emergency Pizza promotion, which offered a free pizza with qualifying purchases, and the customer tipping promotion, rewarding customers who tipped at least $3 on deliveries, played a key role in sustaining demand.
CEO Russell Weiner emphasized that Domino’s strategy was built around affordability, stating, “We believe the QSR brands that offered the strongest value would win. And we made the right call.” He reaffirmed the company’s commitment to similar value-based promotions in 2025, recognizing that another difficult year lies ahead for the restaurant industry.
Dividend Boost and Market Performance
Domino’s announced a 15% dividend increase, raising its quarterly payout from $1.51 to $1.74 per share. This adjustment translates to a 1.52% dividend yield, outpacing the S&P 500’s 1.27% and the Consumer Discretionary Select Sector SPDR ETF’s (XLY) 0.74%.
Despite Monday’s stock drop of 1.5%, which briefly reached an intraday low of 6.8%, Domino’s has seen a 1.2% gain over the past three months—outperforming both the S&P 500’s 0.8% increase and the consumer discretionary ETF’s 0.3% rise.
Outlook for 2025 and External Risks
Looking ahead, Domino’s remains committed to affordability and value-driven marketing. CFO Sandeep Reddy also addressed concerns about potential tariffs proposed by the Trump administration, noting that since the company sources most of its food within the U.S., these tariffs are unlikely to have a significant impact.
While economic headwinds persist, Domino’s Pizza continues to adapt its strategies, reinforcing its presence in the competitive quick-service restaurant space. With a solid dividend increase and a focus on promotional deals, the company aims to navigate the challenges of 2025 while maintaining its market leadership.
