Domino’s Pizza said it expects higher food prices to persist this year, putting pressure on the chain to cope with rising costs without alienating consumers.
“We expect unprecedented increases in our food basket costs versus 2021,” CEO Ritch Allison told attendees of the virtual ICR Conference on Tuesday.
The pizza chain is forecasting an 8% to 10% jump in its food basket costs for 2022, three to four times the inflation for a typical year. Prices for meat, cheese and certain grains are on the rise, making its pizzas more expensive to make.
Food input costs aren’t the only cause for concern. Higher labor costs in the restaurant industry are also expected to persist this year, Allison said.
“That will certainly impact us at Domino’s as well,” Allison said.
During its third quarter, staffing issues put financial pressure on the chain, with some locations shortening hours and missing sales opportunities. Innovations — such as rolling out a new applicant tracking system and updating franchisees on ways to use workers’ time more efficiently — are in the works to address that problem.
The pizza chain is also tailoring its national promotions in an attempt to maintain profit margins while trying to reduce costs. For example, when its $7.99 weeklong carryout offer starts in a few weeks, Domino’s will only offer the deal to customers ordering online.
Digital orders typically result in customers spending more, plus the chain gets access to valuable consumer data, while saving on the labor costs from workers answering phone orders. It also plans to reduce the number of chicken wings and boneless wings available with the offer from 10 pieces to eight.
The pizza chain also reiterated its two-to-three year outlook, saying that it expects 6% to 8% of net unit growth and 8% to 10% in retail sales growth. Wall Street analysts surveyed by Refinitiv are expecting Domino’s to see earnings growth of 12.9% in 2022 and revenue gains of 7.1%.
Shares of Domino’s were off about 1% in midday trading. The stock has climbed 28% over the last 12 months, giving it a market value of $18.3 billion.