Domino’s beats profit estimates as costs ease; focus on Uber Eats deal

Domino’s Pizza (DPZ.N) on Monday beat Wall Street estimates for quarterly profit, supported by easing supply chain pressures and lower food costs including cheese even as demand remained pressured by still higher menu prices and delivery charges.

The company’s shares reversed course from premarket to trade up 2% as investors focused on the higher gross margins and the recently announced Uber Eats partnership.

Supply chain costs fell nearly about 6% to $548.6 million in the three months ended June 18 after largely weighing on earnings in recent quarters, lifting gross margin to 39.5% compared with 36.3% in the year-ago period.

Finance chief Sandeep Reddy said on a post-earnings call the delivery business will remain challenged in the third quarter but expects it to slightly improve with the rollout of an updated loyalty program in September and benefits from the Uber partnership.

Domino’s, which became synonymous with quick home delivery around the world, earlier this month partnered with Uber (UBER.N) to bolster the business by allowing customers to place orders on the ride-sharing company’s food-delivery apps.

The service will be rolled out in four pilot markets in the U.S. in the fall.

“The sluggish results help explain why Domino’s is listing its menus on Uber Eats and Postmates to attract new customers,” said Insider Intelligence’s senior analyst Zak Stambor.

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“Rather than sink money into digital marketing efforts, Domino’s is going where the eyeballs are already looking,” he added.

Revenue of $1.02 billion missed analysts’ average estimate of $1.07 billion, while profit of $3.08 per share beat expectation of $3.05, according to Refinitiv data.

U.S. same-store sales rose 0.1%, missing estimates of an about 0.2% increase.

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