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Domino's Pizza Banks on Strategic Initiatives for Growth
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Domino's Pizza, Inc. (DPZ - Free Report) is riding high on robust earnings history, positive same-store sales, international expansion and sales building initiatives. As a result, the company’s shares have gained 51.3% in a year’s time, outperforming the industry’s 14.4% growth. However, higher costs and negative currency translation woes linger. Let’s delve deeper.
Factors Driving Growth
The pizza category is a fast-growing segment in the U.S. quick-service restaurant industry, and Domino’s is one of the largest pizza chains worldwide. In the United States, the company is the market leader in the delivery segment and ranks second in the carry-out division. Notably, the third quarter of 2018 marked the 30th consecutive quarter of positive same-store-sales domestically. The company has enhanced its brand strength through marketing affiliations with the likes of Coca-Cola and others.
Since Domino’s earns a chunk of its revenues from outside the United States, the company remains committed toward accelerating its presence in high-growth international markets to boost business. Meanwhile, the company’s international growth continues to be strong and diversified across markets, courtesy of exceptional unit level economics. The third quarter of 2018 marked the 99th consecutive quarter of positive same-store sales in its international business. Globally, Domino’s opened 829 and 173 net stores in 2017 and third-quarter 2018, respectively.
Furthermore, many international franchisees continue generating robust returns. Apart from the established markets such as Canada, Japan, Italy, the U.K., Ireland, Switzerland and South Korea, the emerging markets like Brazil, China, Indonesia and Turkey have been posting solid growth. Australia, Russia, New Zealand and Saudi Arabia are also gaining momentum.
Domino’s continues boosting sales through regular limited time offers (LTO). Moreover, the company is investing heavily in technology-driven initiatives like digital ordering to boost sales.
Concerns
Domino’s has undertaken a number of sales-building efforts like the re-imaging of restaurants and the implementation of technology, which along with higher advertising expenses are resulting in higher costs. Moreover, higher labor costs due to Obamacare, and other general and administrative expenses are expected to continue weighing on margins. In the second quarter, cost of sales increased 10.2% from the year-ago quarter.
Also, the Zacks Rank #3 (Hold) company has considerable international presence and is therefore highly vulnerable to fluctuations in exchange rates. Strengthening of the dollar against certain currencies, including the British pound, is likely to impact the company’s results.
BJ's Restaurants reported better-than-expected earnings in the trailing four quarters, with an average of 33.2%.
Dave & Buster's Entertainment has an impressive long-term earnings growth rate of 14.8%.
Darden Restaurants’ earnings for the current year is expected to grow by 16.8%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Domino's Pizza Banks on Strategic Initiatives for Growth
Domino's Pizza, Inc. (DPZ - Free Report) is riding high on robust earnings history, positive same-store sales, international expansion and sales building initiatives. As a result, the company’s shares have gained 51.3% in a year’s time, outperforming the industry’s 14.4% growth. However, higher costs and negative currency translation woes linger. Let’s delve deeper.
Factors Driving Growth
The pizza category is a fast-growing segment in the U.S. quick-service restaurant industry, and Domino’s is one of the largest pizza chains worldwide. In the United States, the company is the market leader in the delivery segment and ranks second in the carry-out division. Notably, the third quarter of 2018 marked the 30th consecutive quarter of positive same-store-sales domestically. The company has enhanced its brand strength through marketing affiliations with the likes of Coca-Cola and others.
Since Domino’s earns a chunk of its revenues from outside the United States, the company remains committed toward accelerating its presence in high-growth international markets to boost business. Meanwhile, the company’s international growth continues to be strong and diversified across markets, courtesy of exceptional unit level economics. The third quarter of 2018 marked the 99th consecutive quarter of positive same-store sales in its international business. Globally, Domino’s opened 829 and 173 net stores in 2017 and third-quarter 2018, respectively.
Furthermore, many international franchisees continue generating robust returns. Apart from the established markets such as Canada, Japan, Italy, the U.K., Ireland, Switzerland and South Korea, the emerging markets like Brazil, China, Indonesia and Turkey have been posting solid growth. Australia, Russia, New Zealand and Saudi Arabia are also gaining momentum.
Domino’s continues boosting sales through regular limited time offers (LTO). Moreover, the company is investing heavily in technology-driven initiatives like digital ordering to boost sales.
Concerns
Domino’s has undertaken a number of sales-building efforts like the re-imaging of restaurants and the implementation of technology, which along with higher advertising expenses are resulting in higher costs. Moreover, higher labor costs due to Obamacare, and other general and administrative expenses are expected to continue weighing on margins. In the second quarter, cost of sales increased 10.2% from the year-ago quarter.
Also, the Zacks Rank #3 (Hold) company has considerable international presence and is therefore highly vulnerable to fluctuations in exchange rates. Strengthening of the dollar against certain currencies, including the British pound, is likely to impact the company’s results.
Key Picks
Better-ranked stocks worth considering in the same space include BJ's Restaurants, Inc. (BJRI - Free Report) , Dave & Buster's Entertainment, Inc. (PLAY - Free Report) and Darden Restaurants, Inc. (DRI - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BJ's Restaurants reported better-than-expected earnings in the trailing four quarters, with an average of 33.2%.
Dave & Buster's Entertainment has an impressive long-term earnings growth rate of 14.8%.
Darden Restaurants’ earnings for the current year is expected to grow by 16.8%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>