Editors' pick: Originally published April 28.
The pizza giant reported first-quarter earnings Thursday of 89 cents a share, falling well shy of estimates for 99 cents a share. Domino's hadn't missed Wall Street profit estimates in over four quarters as it notched red-hot sales last year thanks to success with mobile ordering, renovated restaurants and continued value-based marketing.
The company pinned most of the blame for the earnings shortfall on higher hourly wages at company-operated locations in New York City following legislation that went into effect in January, as well as the impact of the strong U.S. dollar.
Shares fell 7.5% in recent trading Thursday.
"Certainly from a comparable-store sales standpoint we are very proud of the momentum we have in the business. There will always be some puts and takes on expenses in a quarter. Last quarter more of those worked in our favor and more of them worked a little bit against us this quarter," said Domino's Pizza President and CEO Patrick Doyle in an interview with TheStreet.
Doyle added, "The market has to decide what that momentum is worth."
But Domino's did see slowing sales growth in the first quarter, perhaps in part due to a resurgent Pizza Hut, a division of Yum! Brands (YUM - Get Report) . Pizza Hut has begun aggressively marketing affordable pizza. For the first quarter, Pizza Hut's U.S. same-store sales gained 5%, following a 2% increase in the fourth quarter of last year.
Domino's may also have been pinched by the wave of discounting in the burger space being led by McDonald's (MCD - Get Report) , which tripped up chains such as Taco Bell, another division of Yum! Brands, in the first quarter. On a call with analysts Doyle downplayed the impact to Domino's from the burger chains tripping over themselves to offer discounts early in the year, and the re-emergence of Pizza Hut.
Domino's domestic same-store sales at company-owned restaurants increased 4% in the quarter, compared to a 15.9% gain a year earlier. At franchise locations in the U.S., same-store sales increased 6.6%, slowing from 14.4% growth a year ago. The company's international same-store sales rose an impressive 7.9% vs. a 7.8% increase in the year-ago quarter.
"I really don't think it [the discounting] has [had an impact]. Look,pizza tastes better than hamburgers," Doyle told TheStreet. If you look at the food category, pizza is the favorite of people in the United States, particularly for kids and pizza does give terrific value."
On the call with analysts, Doyle said Domino's has a well-stocked pipeline of new products and technologies that could be used to reignite the uber-fast sales growth seen in 2015. No specifics were provided.