Key Points
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Domino’s Pizza reported year over year revenue growth of 4.3%.
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The company has been weathering a period of macroeconomic challenges well.
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However, the challenges seem likely to persist throughout the year, which will slow down growth.
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Domino’s Pizza (NASDAQ: DPZ) reported Q2 earnings before the market opened on Monday, and it was a mixed bag for the world’s largest pizza chain. The company beat on revenue, which grew 4.3% year over year to $1.194 billion, slightly topping analysts’ forecasts of $1.18 billion.
But the company’s earnings per share (EPS) came in at $4.07, missing the analysts’ consensus estimate of $4.11, yet handily beating the prior-year quarter’s EPS of just $3.81, for a growth rate of $0.26/share, or 6.8%.
But the biggest news for Domino’s investors was its unchanged forecast for the year, which still called for low-single-digit same-store sales growth in both U.S. and international locations.
Despite the lackluster report, shares finished up 3.1% over Friday’s close, as big premarket gains on news of the revenue beat were trimmed in the opening hours of trading.
But is Domino’s Pizza a buy after this report? Here’s what investors need to know.
Times are tough all over
It’s a challenging macroeconomic environment for Domino’s.
On the one hand, consumers are being squeezed by inflation and a tepid job market, and are looking for ways to stretch their limited budgets. And with prices going up across the restaurant industry, including at many fast food chains, a large pizza remains one of the most economical ways to feed a family of four. That was borne out by the company’s order count growth in both delivery and carryout during the quarter. CEO Russell Weiner cited “millions of new customers” who the company hopes will become repeat customers and drive further growth.
On the other hand, eating out — even when you’re eating something as affordable as pizza — is still a discretionary purchase. Domino’s isn’t just competing against other quick-service restaurants but also against the more affordable option of cooking at home. That, too, appears to be borne out in the company’s numbers, with U.S. year-over-year same-store sales growth of 0.1% representing the lowest since Q1 2025. With international same-store sales growth actually declining by 0.1%, it was the worst overall same-store sales growth picture in three years.
Cash-strapped consumers appear to be looking for bargains and discounts, which is likely to continue to impact the company’s margins moving forward.
Rising costs
Domino’s itself is getting pinched by the same economic factors affecting its customer base, including inflation and tariffs. Tomato prices, for example, hit record highs in April, according to the Consumer Price Index. And although they eased somewhat in May, they were still 20% more expensive in June than they were a year ago. Even though restaurants pay less for produce than retail consumers, rising costs for tomatoes and other ingredients either need to be passed along to consumers or weigh on the restaurant’s bottom line.
At least for now, it appears as though Domino’s has been successful in managing these increased costs. Supply chain revenue was up 6.5% on a 2.2% increase in “food-basket pricing,” which indicates the company has passed moderate ingredient cost increases on to its franchisees. Cost of sales, however, still rose 4.7% over the prior year, to $716.2 million.
However, the company still predicts lackluster growth in the low single digits to persist throughout the year, as the macroeconomic outlook remains stagnant.
Is it a buy?
Although Domino’s seems to be weathering a rough economic environment well, its shares are down 29.4% for the year, reflecting investor pessimism.
From a value standpoint, that gives the company a price-to-earnings ratio of 19, easily the lowest it’s been in a decade. At the same time, the company’s dividend yield has risen to 2.3%. The company is likely to return to growth once the economy improves, but it may take some time.
Value investors who can be patient and wait out this rough patch will likely find the current share price a compelling entry point for this stalwart business. But in the near term, outperformance seems unlikely.
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John Bromels has positions in Domino’s Pizza. The Motley Fool has positions in and recommends Domino’s Pizza. The Motley Fool has a disclosure policy.
