Amid lower than expected U.S. comparable sales growth, Domino’s Pizza posted less than expected sales, but beat earnings estimates. The pizza chain reported revenues of $785.97 million and earnings per share of $1.95 compared to estimates of $788.08 million and $1.75, respectively.
While same-store sales in the U.S. grew by 6.3 percent and lapped a prior-year increase of 8.4, they were just short of the 6.5 percent rate predicted by analysts. And company-owned stores saw sales growth of 4.9 percent, while analysts were expecting growth of 1 percent higher. Same-store internationally grew 3.3 percent, which was just above estimates of 3.2 percent but lower than prior year increases of 5.1 percent, and the company’s comp in the European market was slightly negative for the quarter, but was still positive for year-to-date.
In remarks to analysts, however, new Domino’s CEO Rich Allison said the company’s U.S. business had an “outstanding quarter.” He noted that strong retail sales growth was driven by a “solid balance” of same-store sales and unit growth. When it comes to digital and marketing initiatives, he noted the buzz created by the launch of Domino’s Hotspots, which enable customers to receive delivery orders in locations that don’t have traditional addresses, like parks and beaches, as well as the Paving For Pizza marketing campaign, which gives grants to cities and towns to fix potholes.
“Both generated terrific attention and are two good examples of how we continue to make news for the brand in unique and different ways,” Allison noted. At the same time, he remarked that the company sees these rollouts as more effective than a limited-time offering or product-of-the-month approach. He added that the strategy also differentiates Domino’s from others in the pizza space, as well as the quick-service restaurant (QSR) landscape overall.
When it comes to store openings and closures, Allison said closures are a key indicator of both brand momentum and franchisee confidence. He noted that the chain only closed seven stores year to date in the U.S., and opened 140 stores. Domino’s Chief Financial Officer Jeff Lawrence pointed out that in the quarter, the chain had 59 net U.S. store openings, counting 61 store openings and two closures. Internationally, the chain had 173 net new stores, with 192 stores opening and 19 stores closing.
To support sales growth, the company opened a supply chain center in Edison, New Jersey, which Allison noted was the first to open in the U.S. in more than a decade. He also said that the company was working to bring voice and mobile capabilities into the store level, behind the scenes in inventory management and other areas. While those implementations are not consumer-facing, Allison stated that “these launches can also drive value.” He added that the company is continually looking to use technology to benefit franchisees, managers and store team members.
For the second quarter, Domino’s Pizza disappointed Wall Street investors in mid-July when the pizza chain reported slower-than-expected growth during the second quarter. However, the company announced new investments in supply chain infrastructure and showed positive customer response to its new deliver-everywhere Hotspot platform.
Lawrence told analysts during the second quarter conference call that, while the company was pleased overall with the growth, it had slower than expected international growth in stores during the first half of the year. He said the company doesn’t see any structural or material market-related reason for the slowdown, and reiterated the chain’s prior forecast of 6 percent to 8 percent global growth in new stores over the next three to five years.
The company had 396 corporate-owned stores in the U.S. as of June 17, while it had 5,296 franchise stores domestically and 9,430 international stores. Allison, the former president of the company’s international business, is just a few months into his job as CEO; he assumed the position after the retirement of J. Patrick Doyle with his second earnings call for the pizza chain.