Industry News | April 27, 2017 | By Danny Klein | QSR Exclusive Brief

Red-Hot Domino’s Isn't Afraid of Delivery Competition

Domino’s
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No matter how you slice it, Domino’s is red-hot right now. The pizza chain blew past Wall Street estimates Thursday with its first-quarter earnings, following a string of positive quarters with what might just be its best yet.

Domino’s reported its 24th consecutive quarter of positive sales momentum and 93rd straight of positive international same-store sales growth.

In the first quarter, Domino’s domestic same-store sales increased 10.2 percent versus the year-ago period. The earnings per share skyrocketed 41.6 percent to $1.26, which topped the Wall Street consensus estimate of $1.17. Revenues grew 15.8 percent to $624.2 million, also besting analysts’ prediction of  $615.66.

“It was a great start to 2017, as momentum continued with solid growth in our international business, and our third consecutive quarter of double-digit same store sales growth in the U.S.,” said J. Patrick Doyle, Domino’s president and chief executive officer, in a statement. “The ultimate measure of customer satisfaction is more customers choosing to do business with you. The growth we are experiencing—both in store counts and customer visits—is a reflection of great commitment and execution by our franchisees and team members.”

Domino’s enjoyed global net store growth of 189 stores during the quarter, including 28 domestically, bringing the total added to 1,308 net stores over the past four quarters.

Internationally, Domino’s reported same-store sales growth of 4.3 percent. Thanks to all this growth, net income rose 37.4 percent. Domino’s also credited higher supply chain volumes and lower food costs to the boost, as well as the adoption of a new equity-based compensation accounting standard. The chain reported global retail sales growth of 13.2 percent.

"As we discussed at our Investor Day, our performance is the result of many years of reshaping our brands, improving our food, investing in our digital capabilities, reinvesting in our stores, and most importantly, building a team of the best people in the restaurant industry, both working for our company and throughout our global franchise system," Doyle said in a conference call Thursday.

If this wasn’t enough to buoy investors, Domino’s also revealed its plan to remain at the forefront of the quick-service delivery picture.

Doyle said in the conference call that “those drivers who are listening to this call, my pitch is: you're going to be more consistently busy and receiving tips at Domino's than working somewhere else. "And that is ultimately what keeps drivers happy, is that they're busy. And the more orders they are getting in an hour, the more tips they're getting in an hour, and that's ultimately what's going to make it a good earning proposition for them and they do really well with us."

Domino’s is well ahead of the field, as consumers are already comfortable using their mobile ordering platform. Domino’s said it is testing GPS-tracking technology and isn’t worried about losing business to McDonald’s or Panera, the latter which recently announced it was hiring 10,000 employees to expand the service. McDonald’s spoke of its plans to broaden delivery capabilities this week as well.

Domino’s better-than-expected news sent shares up more than 3 percent Thursday, up to 186.90 in midday trading on the stock market.

"Our story is one of a true long game approach, riddled with difficult decisions, reset priorities, and smart risks, which, while they took time to bear fruit, eventually reshaped our brand and system. I say all of this because we are often asked about which specific activities are driving our near-term success. And while our great analytics gives us many of the answers, we know that the cumulative effect of a lot of long-term decisions over many years is what is ultimately driving our success," Doyle said.