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Domino's Poised for Global Expansion, Opens 14000th Store
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One of the leading pizza delivery and digital ordering platforms, Domino's Pizza, Inc. (DPZ - Free Report) is consistently trying to expand its presence and gain market share. The company is the market leader in the delivery segment in the U.S. and ranks second in the carry-out segment.
However, since Domino’s earns a chunk of its revenues from outside the U.S., it remains committed to accelerate its presence in high-growth international markets. Notably, the company’s international growth continues to be strong and diversified across markets, driven by exceptional unit level economics.
Taking the growth story forward, Domino’s recently opened its 14000th outlet worldwide in Cyberjaya, Malaysia, outside of the nation's capital of Kuala Lumpur. Cyberjaya is considered to be the innovation hub of Malaysia. Thus, technology being the central focus of the brand in Malaysia, Cyberjaya makes for the perfect milestone location.
Notably, this outlet features the brand’s “Pizza Theater” store design, which offers a comfy lobby, open-area viewing of the food preparation process and the ability to track carryout orders electronically on a lobby screen.
In fact, the new store is a milestone of many sorts. It marks the brand’s 200th store for the Malaysian market and its 3500th store for the Asia-Pacific region.
The Malaysian outlet is in agreement with the master franchisee for the market, Dommal Food Services Sdn. Bhd., that opened the first store in Malaysia in 1997 and has successfully made Domino's one of the most recognized brands in the country.
Domino’s has a wide franchise network, both domestically and internationally. Reducing its ownership of restaurants and focusing more on re-franchising minimizes the company’s capital requirements and facilitates earnings per share growth and return on equity expansion. In addition, free cash flow continues to grow, thus allowing reinvestment for increasing brand recognition and shareholder return.
In fact, the company has increased its dividend by 25%, 24%, 23% and 21% in 2014, 2015, 2016 and 2017, respectively, after initiating regular dividends in 2013. Moreover, Domino’s is less affected by food inflation as a result of franchising compared to other pizza companies with global operations.
Meanwhile, many of the international franchisees continue to generate robust returns. Apart from established markets such as Canada, Japan, the U.K., Ireland, Switzerland and South Korea, emerging markets like Brazil, China, Indonesia and Turkey have been posting strong growth. Australia, Russia, New Zealand and Saudi Arabia are also gaining momentum.
In the meantime, India remains a market of immense growth potential for the company. In fact, Domino’s India operations are the fastest growing operations in its global system. Moreover, the company’s entry into Milan, Italy, the birthplace of pizza, in 2015 is expected to spur growth as Italians are known to eat pizza several times a month.
However, given its sizeable international operations, Domino’s is exposed to risks of fluctuations in currency exchange rates, which might impact the company’s top line. Moreover, a challenging industry backdrop remains a potent cause of concern for most restaurant chains like Jack in the Box Inc. (JACK - Free Report) , Brinker International, Inc. (EAT - Free Report) and many others. Though Domino’s has been faring well so far, the continued slowdown in the industry at large might hamper its prospects, going forward.
Bottom Line
Nevertheless, the demand for pizzas is unlikely to go down in the coming days and pizza giants like Domino’s and Papa John's International Inc. (PZZA - Free Report) ride on this certitude. In fact, shares of the company increased 27.6% over the last one year against the Zacks categorized Retail–Restaurants industry’s decline of 2%.
Also, upward estimate revisions reflect optimism regarding the stock’s prospects. The Zacks Consensus Estimate for current quarter and current-year earnings moved north by 2.7% and 1.6%, respectively, over the last 60 days.
Despite certain headwinds, Domino’s operational advantages, its market share and scale along with insistent focus on innovation and execution of growth strategy, should aid the stock in maintaining its solid performance, going forward.
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Domino's Poised for Global Expansion, Opens 14000th Store
One of the leading pizza delivery and digital ordering platforms, Domino's Pizza, Inc. (DPZ - Free Report) is consistently trying to expand its presence and gain market share. The company is the market leader in the delivery segment in the U.S. and ranks second in the carry-out segment.
However, since Domino’s earns a chunk of its revenues from outside the U.S., it remains committed to accelerate its presence in high-growth international markets. Notably, the company’s international growth continues to be strong and diversified across markets, driven by exceptional unit level economics.
Taking the growth story forward, Domino’s recently opened its 14000th outlet worldwide in Cyberjaya, Malaysia, outside of the nation's capital of Kuala Lumpur. Cyberjaya is considered to be the innovation hub of Malaysia. Thus, technology being the central focus of the brand in Malaysia, Cyberjaya makes for the perfect milestone location.
Notably, this outlet features the brand’s “Pizza Theater” store design, which offers a comfy lobby, open-area viewing of the food preparation process and the ability to track carryout orders electronically on a lobby screen.
In fact, the new store is a milestone of many sorts. It marks the brand’s 200th store for the Malaysian market and its 3500th store for the Asia-Pacific region.
The Malaysian outlet is in agreement with the master franchisee for the market, Dommal Food Services Sdn. Bhd., that opened the first store in Malaysia in 1997 and has successfully made Domino's one of the most recognized brands in the country.
Domino’s has a wide franchise network, both domestically and internationally. Reducing its ownership of restaurants and focusing more on re-franchising minimizes the company’s capital requirements and facilitates earnings per share growth and return on equity expansion. In addition, free cash flow continues to grow, thus allowing reinvestment for increasing brand recognition and shareholder return.
In fact, the company has increased its dividend by 25%, 24%, 23% and 21% in 2014, 2015, 2016 and 2017, respectively, after initiating regular dividends in 2013. Moreover, Domino’s is less affected by food inflation as a result of franchising compared to other pizza companies with global operations.
Meanwhile, many of the international franchisees continue to generate robust returns. Apart from established markets such as Canada, Japan, the U.K., Ireland, Switzerland and South Korea, emerging markets like Brazil, China, Indonesia and Turkey have been posting strong growth. Australia, Russia, New Zealand and Saudi Arabia are also gaining momentum.
In the meantime, India remains a market of immense growth potential for the company. In fact, Domino’s India operations are the fastest growing operations in its global system. Moreover, the company’s entry into Milan, Italy, the birthplace of pizza, in 2015 is expected to spur growth as Italians are known to eat pizza several times a month.
However, given its sizeable international operations, Domino’s is exposed to risks of fluctuations in currency exchange rates, which might impact the company’s top line. Moreover, a challenging industry backdrop remains a potent cause of concern for most restaurant chains like Jack in the Box Inc. (JACK - Free Report) , Brinker International, Inc. (EAT - Free Report) and many others. Though Domino’s has been faring well so far, the continued slowdown in the industry at large might hamper its prospects, going forward.
Bottom Line
Nevertheless, the demand for pizzas is unlikely to go down in the coming days and pizza giants like Domino’s and Papa John's International Inc. (PZZA - Free Report) ride on this certitude. In fact, shares of the company increased 27.6% over the last one year against the Zacks categorized Retail–Restaurants industry’s decline of 2%.
Also, upward estimate revisions reflect optimism regarding the stock’s prospects. The Zacks Consensus Estimate for current quarter and current-year earnings moved north by 2.7% and 1.6%, respectively, over the last 60 days.
Despite certain headwinds, Domino’s operational advantages, its market share and scale along with insistent focus on innovation and execution of growth strategy, should aid the stock in maintaining its solid performance, going forward.
Domino’s currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>