Domino's Pizza Q1 Operating Margin Shrinks As Lower-Income Consumers Feel the Pinch

Domino's Pizza Inc. DPZ shares were trading lower on Monday after the company reported its first-quarter FY25 earnings.

The company reported first-quarter revenue growth of 2.5% year over year to $1.11 billion, missing the analyst consensus estimate of $1.13 billion. EPS of $4.33 beat the consensus estimate of $4.07.

The revenue increase was primarily due to higher U.S. franchise advertising revenues, higher supply chain revenues and higher international franchise royalties and fees. 

The growth in supply chain revenues was attributable to an increase in the company's food basket pricing to stores, which increased 4.8% during the first quarter of 2025 as compared to the first quarter of 2024.

Also Read: US Restaurants Face Growth Hurdles As Macro Headwinds Mount, Says Analyst

Global retail sales increased 4.7%, excluding the impact of foreign currency. Same-store sales in the U.S. fell 0.5%, while International same-store sales (excluding foreign currency impact) increased 3.7%.

The company's global net store count decreased by eight stores. Gross margin for the quarter expanded 90 basis points to 39.8%, while operating margin contracted 50 basis points to 18.9%.

Operating cash flow for the quarter totaled $179.1 million, with a free cash flow of $164.4 million. Domino's held $304.3 million in cash and equivalents as of March 23.

On April 23, 2025, the company's Board of Directors declared a $1.74 per share quarterly dividend on its outstanding common stock for shareholders of record as of June 13, 2025, to be paid on June 30, 2025.

As of March 23, 2025, the company's total remaining authorized amount for share repurchases was $764.3 million.

"Sustained market share growth reflects a company's ability to control what is under its control, a key to long term success. In the face of a challenging global macroeconomic environment, our Hungry for MORE strategic pillars are working together to drive MORE sales, MORE stores and MORE profits, annually," said CEO Russell Weiner.

On the company conference call, the executive mentioned that the business was impacted by the macro pressures on the lower-income consumer.

Price Action: DPZ shares are trading lower by 1.27% at $481.39 at last check Monday.

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