Domino's Rises After Sales Gain Defies Restaurant-Slowdown Fears

By Publications Checkout
Domino's Rises After Sales Gain Defies Restaurant-Slowdown Fears

Domino’s Pizza Inc. rose the most in almost eight months after third-quarter sales topped analysts’ estimates, easing fears that the chain may be susceptible to a broader slowdown at US restaurants.

Sales at domestic franchises open for at least a year rose 13 percent, and the gain was 14 percent at company-owned locations, Ann Arbor, Michigan-based Domino’s said Tuesday in a statement. Analysts estimated increases of 9.4 percent and 8.5 percent, respectively.

Domino’s has kept revenue growing -- in the face of a tough environment for the restaurant industry -- partly on the strength of its online ordering system and loyalty program. The company said in July that digital orders make up 45 percent of U.S. sales. Domino’s last month introduced a new way of ordering via Facebook as the chain looks to make getting pizza even easier and engage with diners on social media.

“Domino’s has done a lot of things right,” said Bloomberg Intelligence analyst Michael Halen. “First and foremost is technology, but marketing, remodels and a strong value proposition are also contributing to their success.”

The shares rose as much as 7.7 percent to $163.73 in New York, the biggest intraday gain since Feb. 25. Domino’s already had advanced 37 percent this year through Monday.

Profit Beats

Third-quarter profit rose to 96 cents a share, topping analysts’ 90-cent average estimate. Revenue climbed 17 percent to $566.7 million, beating the $543.4 million consensus projection.

Analysts such as Stifel Financial Corp.’s Paul Westra raised concerns that the restaurant sector was hitting a downturn. Since that speculation began, chains including Burger King and Shake Shack Inc. have posted sales results that missed analysts’ expectations. Tuesday’s results indicate that Domino’s has so far managed to dodge some of the slump.

“It seems like pizza, in general, may be doing better than other restaurants because of the strong value proposition,” Halen said. “You can feed a family of four and have leftovers for less than $15, and that’s very difficult to do.”

News by Bloomberg, edited by Hospitality Ireland