World News

Domino’s shares hit new high on first U.S. same-store sales beat in a year

By Nivedita Balu

(Reuters) – Domino’s Pizza Inc’s <DPZ.N> shares soared 25% to a record high after the pizza chain comfortably beat quarterly U.S. same-store sales and profit estimates on Thursday, benefiting from its focus on faster delivery and new promotions.

The company has been opening stores, adding new menu items and offering faster delivery to fight competition from rival pizzerias, mom-and-pop stores and aggregators such as Uber Eats, and GrubHub <GRUB.N> which deliver a variety of food at diners’ doorstep.

As a part of these efforts, Domino’s offered half off on menu-priced pizzas for online orders during the Cyber Monday week and also expanded its GPS delivery tracking technology across its U.S. stores during the reported quarter.

“We certainly still saw a lot of aggregator, promotion, and advertising activity out there,” Chief Executive Officer Ritch Allison told analysts on a post earnings call. “But a lot of the things we did internally worked nicely in the quarter.”

Sales at its established U.S. restaurants rose 3.4% in the fourth quarter, beating estimates for the first time in over a year. Analysts had projected a rise of 2.3%, according to IBES data from Refinitiv.

“(The same-store sales rise) should meaningfully improve investor sentiment as trends suggest its domestic pizza delivery market share is being well defended and expanding,” Guggenheim Partners analyst Matthew DiFrisco said.

RBC Capital Markets analyst Christopher Carril noted that this was the first sequential quarter-over-quarter rise in U.S. comparable sales in almost two years, which was “encouraging and evidence that incremental headwinds from said competition may be subsiding.”

The company’s shares, which outperformed those of rivals McDonald’s and Yum Brands in 2019, rose as much as 28.5% in early trade to touch a record of $381.86.

However, international same-store sales at Domino’s rose 1.7%, missing estimates of a 2.09% rise.

Rival Pizza Hut, owned by Yum Brands Inc <YUM.N> reported disappointing results earlier this month, as stiff competition took a bite out of sales.

Net income rose 15.8% to $129.3 million from a year earlier.

On an adjusted basis, the company earned $3.13 per share, 15 cents above expectations.

Total revenue rose 6.3% to $1.15 billion, beating estimates of $1.13 billion.

(Reporting by Nivedita Balu in Bengaluru; Editing by Shounak Dasgupta and Shinjini Ganguli)