Domino's pizza's warning on the impact of labor shortage

Yahoo Finance's Brian Sozzi takes a look at Domino's Pizza and how the company has been impacted by the labor shortage.

Video Transcript

- Some other stories that we are watching today, not just today, but sort of more trends. So if you were just talking, Brian Sozzi, to the head of Caribou Coffee about finding workers. And we had another example yesterday of a company that's having a lot of trouble doing so. That is Domino's Pizza.

BRIAN SOZZI: Yeah. I wrote a news story, it's on the Yahoo Finance Homepage right now. And the title is really quite simple, Domino's Pizza Is Getting Eaten Alive By The Worker Shortage. Or as I note in the piece, Getting Absolutely Clobbered. So in the most recent quarter, Domino's noted one of the most impressive fast food streaks around was in fact Domino's. They had seen 41 straight quarters of same store sales growth in the US, really unheard of.

Well, guess what? That streak came to a close in the third quarter in large part because they could not get enough workers to service the demand that they are soaring, that they have seen on the platform that impact their order counts, impact their traffic, you name it here. Also, it is also causing them not to be able to be as aggressive on promotions to drive sales.

CEO Rich Allison really spent a good deal of time in the earnings call breaking down the problems they're having to get workers. They're also having to raise wages at company operating restaurants. Now Alison did not give a lot of detail on how much this impacted in the quarter. But when you have same store sales down negative in both company operating and franchise operating divisions as Domino's did, it's a huge red flag. And it also, Julie, could be a huge red flag to restaurant earnings coming up over the next few weeks.

Good little nugget from Guggenheim's Gregory Francfort here noting quote, "This labor pressure is not Domino's specific and, in our view, should rather be a harbinger for the rest of earnings season. So a lot of these restaurants, investors should be on high alert for more Domino's type quarters. Overall, my hot take is this, eat the pizza, not the stock. I don't think these labor challengers are going to go anywhere anytime soon. And then secondarily, I mean, you look at Domino's, they have no pricing power. I mean, for years they've been trying to hawk us pizza for $5.99 a pop. It's going to be hard to charge $9 for the same pizza here to offset the inflation they're seeing in their business.

- Yeah. Interesting there. We'll see what continues to happen.

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