Earnings

The Domino’s Pizza company logo is displayed on the jacket of delivery driver in London, U.K., on February 27, 2017.

Jason Alden | Bloomberg | Getty Images

Domino’s stock fell Tuesday after the company reported weaker same-store sales growth as it expands its store base and grapples with the threat of third-party delivery.

Shares of the pizza delivery chain fell 7% in premarket trading.

To hold onto its spot as the world’s number one pizza chain, Domino’s has been carrying out a strategy that it calls “fortressing.” Under the strategy, stores are added to existing markets to be closer to customers, making deliveries faster and theoretically increasing driver tips.

Skeptics argue that Domino’s aggressive expansion leads to cannibalization, negatively impacting same-store sales growth. During the second quarter, the restaurant company said that domestic same-store sales grew by 3.0%, falling short of Wall Street’s estimates of 4.8%.

“It was a good second quarter, particularly for global unit growth, as we continue to seek balanced retail sales growth through the blend of same store sales and store growth,” CEO Ritch Allison said in a statement.

Domino’s added 200 net new stores during the quarter, including 42 new U.S. locations.

With the rise of third-party delivery services, the pizza chain has not only been battling for customers from rivals Pizza Hut and Papa John’s, but also every restaurant using Uber Eats, DoorDash and GrubHub. On last quarter’s conference call, executives said that national marketing campaigns from third-party delivery apps put pressure on domestic same-store sales growth.

Net sales during the second quarter rose 4.1% to $811.6 million, missing expectations of $836.6 million. While sales at stores open at least a year fell short, sales at all U.S. stores grew by 6.8% during the quarter.

Domino’s earned $2.19 per share, topping the $2.02 per share expected by analysts surveyed by Refinitiv.

Products You May Like

Articles You May Like

Massive Arctic wildfires emitted more CO2 in June than Sweden does in an entire year
Domestic terrorism may boost interest in this type of insurance coverage
To meet future energy demands, India is promising a push toward sustainability
Deere earnings fall short as company says farmers are delaying purchases because of the trade war
Fear needs to get more extreme for stocks to bottom, BofA’s Stephen Suttmeier says

Leave a Reply

Your email address will not be published. Required fields are marked *