Domino's Pizza U.S. head sees recession
Wed Mar 19, 2008 3:47pm EDT
CHICAGO (Reuters) - The president of Domino's Pizza Inc's (DPZ.N: Quote, Profile, Research) U.S. business said on Wednesday that the U.S. economy is probably in a recession and consumers are feeling the pressure of the tough economic environment.
"Certainly, the consumer is not happy right now," said J. Patrick Doyle, president of Domino's USA, speaking at the Reuters Food Summit in Chicago.
But he said that the recessionary environment appears to be limited to the United States at the moment.
"So far, at least, this appears to be an entirely U.S. based phenomena," he said. Domino's Pizza operates in both the United States and abroad, in markets like Mexico, Australia, Japan and India.
Despite strength abroad, the pizza chain, like some other restaurant operators, has faced a difficult time with domestic sales, as it juggles higher commodity costs and price-sensitive consumers who are hesitant to spend on meals outside the home as they wrestle with rising food and fuel costs themselves.
In December, it posted a nearly 48 percent drop in its fourth-quarter net income, hurt by high cheese and wheat costs and a cash-strapped U.S. consumer.
Doyle said Domino's raised prices last year and tried to reduce certain promotions to offset rising commodity costs.
"We didn't get it all right," he said of the efforts. But he said he did not expect the pizza chain to have to increase prices in a "material" way this year.
"While you may still see some increases going forward, I think the sheer magnitude of the cost pressures that came through last year were really large. So most of the pricing that we had to take, we've taken," he said.
Doyle also said the pizza chain locked in its wheat costs for the year "well below where it is now."
One area that is performing well for Domino's is its online ordering business, which he said is growing "incredibly rapidly."
"Consumers are migrating there in a hurry," he said.
All the top U.S. pizza delivery chains -- Domino's, Pizza Hut and Papa John's International Inc (PZZA.O: Quote, Profile, Research) -- have invested in online ordering as a way to boost sales in one of the restaurant industry's most competitive segments.
