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Domino's hit by competition on deliveries, shifts outlook

Stock Markets Oct 08, 2019 08:38AM ET
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© Reuters. FILE PHOTO: A Domino's Pizza restaurant is seen in Los Angeles
 
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(Reuters) - Domino's Pizza (N:DPZ) missed Wall Street estimates for quarterly same-store sales and profit on Tuesday, hurt by growing competition from third-party delivery services and small pizzerias, sending the pizza chain's shares down 6%.

The company also replaced its three- to five-year forecast with a shorter-term outlook which included lower percentage growth targets than those given previously for the longer period.

It said it now expects same-store sales at its U.S. stores to rise 2% to 5% and its international segment to grow 1% to 4% in two to three years, compared with a previous 3% to 6% growth at either segment over three to five years.

The pizza chain, one of the modern faces of pizza delivery, faces competition from the aggressive promotions and wider range of food offered by aggregators such as Uber (NYSE:UBER) Eats, Postmates and GrubHub (N:GRUB).

Same-store sales at restaurants open for more than an year in the United States rose 2.4% in the quarter, its slowest growth in at least 15 quarters. Analysts had estimated a 2.84% rise, according to IBES data from Refinitiv.

The slowdown in the market came despite the company offering half-off on online orders for a week in August and launching a 20% off offer for late-night orders in September.

Domino's is also one of the largest chains to stay off third-party delivery apps altogether, as more restaurant chains become heavily dependent on meal-delivery companies to boost sales at the cost of lower profit margins.

Ann Arbor, Michigan-based Domino's has also been aggressively opening new restaurants in a move it calls "fortressing" to facilitate faster delivery to locations beyond homes and offices, ranging from beaches to bus stops.

Its international business, whose performance has been mixed against market expectations in recent quarters, saw same-store sales grow just 1.7%, missing estimates of a 2.86% rise.

The company's net income rose to $86.4 million, or $2.05 per share, in the third quarter ended Sept. 8, from $84.1 million, or $1.95 per share, a year earlier.

Analysts on average had expected a profit of $2.07 per share.

Total revenue rose 4.4% to $820.8 million, missing analysts' estimate of $823.9 million.

Domino's hit by competition on deliveries, shifts outlook
 

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