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Domino’s Pizza grappling with delivery driver shortage, inflation

Yahoo Finance Live anchors discuss the outlook for Domino’s Pizza amid labor shortages and second-quarter earnings.

Video Transcript


- Domino's Pizza, or as they call them in your local neighborhood, Domino's, they reported delivery sales--

- Ooh!

--crashing around--


- --11.7% in the second quarter versus a year ago, despite its best effort to address lost sales due to its ongoing delivery driver shortage. How grim of an outlook is cooking up for Domino's Pizza? That's where we find Sozzi's Takes today. Sozzi?

- This is Brad's take today. I mean, how can I even follow that up?

- That's like-- forget about Target. It's Domino's.

- Domino's. Yeah, I got to give that one to Arthur Spinner.

- Let's just go back to our desk and talk about some snap earnings. But look, I'm still chewing on this quarter from Domino's. I'm sniffing around for things that may or may not be great.

One thing that stood out to me from reading the conference call at length is the driver shortage. Our senior editor, Myles Udland, highlighted to me-- and I wrote it up for our home page-- that that driver shortage continues. And it's not getting any better.

It has now come to the point where Domino's is-- if you call up-- and there are still people that call up the local Domino's to put in an order-- they're now routing that call to a call center, maybe out in the middle of the country somewhere. So that person in the store is not taking your call. They're out there delivering pizzas.

So I have the full story on Yahoo Finance up about that. It's just an interesting little way they're trying to address this driver shortage. It doesn't appear to be working because Domino's sales were under a lot of pressure again in the second quarter.

Just a couple of takeaways from that quarter-- driver shortage is a big problem. It's not going away any time soon. I would argue it's getting worse for the likes of Domino's, or at least that was my takeaway from the results yesterday.

Inflation also a major problem really hammering the franchisee owners that own these Domino's locations. And last but not least, does Domino's have pricing power? And that could be argued as well.

In a competitive pizza market, it's hard to see them being able to push through enough price, or those franchisees pushing through enough price, to offset the inflation they are, in fact, seeing. And it is starting to get expensive on the websites. You can get a Domino's Specialty Pizza for almost $20 now. It's a lot more than it used to be, maybe not so family friendly.

Overall, here's my take for Domino's pizza. It could be, I think, a couple of more challenging quarters ahead for this company. There I am smiling. Maybe I should be a little sad about this Domino's quarter, but not a tasty outlook.

- Well, you're about to eat a pizza.

- Yeah. Yes, that will make most people happy, including me, but not a tasty outlook for Domino's. The margin under attack. The sales are not going the right way. The street has been out here aggressively trying to defend Domino's, thinking, I think, that it is still the Domino's from five years ago when Patrick Doyle was running the company and things were so good. It's just a challenge company.

- You know, I'm curious how the driver shortage is playing out in real life. In other words, like, if you're calling-- if you're one of those people who call, and they say it's going to be an hour, do you just say, never mind, I'll go somewhere else?

- Yes, and that's what's happening.

- So my other thought is the driver shortage and the shortage of workers everywhere, especially low-wage workers, is because those people have had more power during this worker-constrained time, right? So does that mean, as the economy starts to roll over, they'll actually have an easier time getting drivers? In other words, if you get laid off from your job at Snap, for example, and you need a bridge to your next thing, do you say, oh, maybe, I'll go deliver some pizzas in the meantime?

- I see where you're going, but if you get laid off from Snap, you probably have a couple million in your bank account.

- I say it kind of-- well, not everybody. I say it kind of tongue-in-cheek. In other words, there will be more availability of workers as the economy starts to decrease.

- But would these companies need those workers? Is Domino's seeing a pullback in orders in a recessionary period?

- Good question.

- It's unclear.

- Well, here's the other transition that Domino's has also been trying to work into their model is the autonomous vehicle delivery. They've been testing this out with Nuro to try and solve for this problem ahead of time and reduce that cost per delivery for themselves as well. And so that's something else that's at play at the same time, where you might have some of the people that are getting back into the OG gig economy trying to just look for that bridge.

- But that's also a big, big upfront investment on the part of Domino's.

- And I don't want to sit here and hammer Domino's. If Domino's is being impacted by the labor shortage, a lot of other restaurant competitors are also feeling the same thing.

- Definitely. Maybe you should go do some driving to like just to test out and report back to us.