Lost in the sauce

Delivery sites slicing Domino’s biz

Domino’s Pizza said aggressive discounting by third-party delivery services like DoorDash is hurting its US sales — and shows no sign of letting up.

US sales at stores open at least a year rose 3 percent in the second quarter, a metric that was below analysts’ forecasts of 4.5 percent, according to FactSet. It was the third straight quarter that US same-store sales have fallen short of expectations, Domino’s Chief Executive Ritch Allison said.

Domino’s has its own drivers and doesn’t work with delivery services like UberEats and GrubHub, which are racing to sign up customers with referral bonuses and other deals. Those services have made it easier for consumers to order a wide variety of food beyond pizza.

“We expect that behavior to continue for some period of time,” Allison said during a conference call with analysts. “While the economics of the business are still open to question for the long term, the near-term activity indicates investors are willing to lose a lot of money in the short term to drive market share.”

Domino’s shares closed down 8.7 percent Tuesday, at $246.54.

Allison said Domino’s is fighting back by opening more stores, which ensures faster delivery times and increases global market share. The company opened 158 net new stores internationally during the quarter and 42 net new stores in the US. Global retail sales were up 5 percent thanks to the rapid pace of store openings.

The new stores, however, are hurting samestore sales figures — a key metric of a retailer’s health — since business is spread across more stores. But Allison said the strategy is still the right one to ensure Domino’s dominance in the market.

“It’s an investment we and our franchisees are happy to make for longterm growth,” he said.

Some franchisees also raised food prices and delivery fees during the second quarter to combat lower customer traffic and higher wages, Allison said.