Domino’s 1Q23 Results Shine Light on Low-Income Consumers

May 1, 2023 | Corporate Insights, No Bull Economics

Domino’s reports that there is only a 15% customer overlap between delivery & carryout. With certain low-income consumers pulling away from expensive delivery fees to eat at home, there is apparently another low-income consumer segment stepping up for carryout.

Sales

  • 1Q23 system comps increased +3.6% y/y, driven by +6.2% in pricing (reflecting its March 2022 Mix & Match national delivery pricing increase from $5.99 to $6.99 with the same increase implemented for Mix & Match carry-out pricing in October 2022). Delivery fees were relatively stable during the quarter & management noted a trade-down from non-Domino’s carryout to Domino’s carryout.
  • Carry out contributes 50% of Domino’s orders & 40% of sales. Delivery margins are lower than carryout.
  • Carryout comps increased +13.4% y/y during the quarter, rolling over the prior year’s increase of +11.3% y/y.
  • Delivery comps declined -2.1% y/y, rolling over the prior year’s decline of -10.7%. Delivery remains challenged by: a migration of demand from the delivery channel to the sit-down channel; and constrained budgets for households with relatively lower disposable income, particularly when factoring fees & tips, prompting them to cook at home. A forthcoming moderation in inflationary pressures could help disposable incomes, and resultantly, delivery sales.
  • While delivery times improved by 1 minute y/y, the goal remains to return delivery service to 2019 levels.

Margins

  • Market basket pricing increased +4.6% y/y during the quarter.
  • 2023 guidance for market basket pricing: +3% to +5%.
  • U.S. franchisee store profitability was $139,000 during 2022, with 4Q22 profits higher than 4Q19 as operators benefitted from the Mix & Match national pricing increases. Profit improvements are expected to continue into 2023, helped by an incremental margin dollar lift generated by its new Loaded Tots.
  • 2022 new build costs were up +20% from 2019 levels.
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