Domino’s Drops After Pizza Maker Offers Less Robust Outlook

(Bloomberg) -- Domino’s Pizza Inc. fell after the company reined in its long-term sales forecast as it struggles to fend off competitors’ increasing delivery options and discounts.

• The chain offered a less robust outlook, saying U.S. same-store sales will increase 2% to 5% in the next two to three years. That replaces its previous three-to-five-year forecast for 3% to 6% growth.

Key Insights

• Domino’s is having a hard time keeping up its fiery sales pace as competition for food delivery heats up from both fast food and sit-down chains to lure time-strapped Americans. Chipotle Mexican Grill Inc. now has the service, and Chili’s is advertising its nationwide delivery on TV.
• Same-store sales at Domino’s U.S. restaurants grew 2.4% in the third quarter, missing the 2.6% average of analysts’ estimates, according to Consensus Metrix. International comparable sales also fell short of projections.
• The major pizza chains are discounting more, aiming to draw diners with cheap fare. Domino’s recently advertised a large pizza for $5.99 for carryout customers, and Pizza Hut last year introduced a $5 menu.
• Labor costs have been pressuring both company-owned stores and franchises. Restaurants are struggling to hire and keep workers with a stubbornly low unemployment rate that dropped to 3.5% in September -- the lowest since 1969.

What Bloomberg Intelligence Says

“Although Domino’s cut its same-store sales growth guidance for the next two to three years, we think it will continue to gain share, albeit at a slower pace, on superior tech and data analytics.”

--Michael Halen, restaurant analyst

--Click here to read the research.

Market Reaction

• Domino’s shares fell as much as 6.1% to $227.50 Tuesday in New York. The stock, which has seen double-digit growth for the past 10 years, declined 2.3% this year through Monday’s close.

Get More

• For more on the results, click here.
• For the company statement, click here.

To contact the reporters on this story: Lisa Wolfson in Boston at lwolfson@bloomberg.net;Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Craig Giammona

©2019 Bloomberg L.P.