Domino's Retains A Winning Market Share As Growth Slows – The Fool Motley

Domino's Pizza (NYSE: DPZ) is looking for many ways to take advantage of its dominant grip on the pizza delivery business, even as its pace of expansion slows both domestically and internationally. This is what we have to remember from the results announced recently for the third quarter.

Here's how Domino's numbers compare to those of the previous year:

Data source: Domino financial records. YOY = from one year to the next.

What happened with Domino's Pizza this quarter?

Revenues jumped thanks to higher sales at existing sites around the world and the addition of more than 200 new stores to the sales base. Meanwhile, Domino overcame a slight drop in profitability thanks to the reduction of interest charges and the reduction of the tax burden.

Source of the image: Getty Images.

Here are some highlights of the quarter:

• Same store sales growth was 6.3% in the main US market, which recorded its second consecutive quarter of deceleration in earnings. Growth was 7% in the last quarter and 8% at the beginning of the year.
• Sales gains also slowed internationally, but at 3.3%, they remained within the range of management's guidance, ranging from 3% to 6% for the year.
• Domino's physical expansion has accelerated, with 232 new locations added to its base, up from 113 in the previous quarter. Over the past year, Domino's has added 920 delivery hubs and takeaway orders, bringing its number of stores to over 15,300.
• After adjusting for changes in its accounting policies, profitability decreased slightly. Operating profit rose from 18.2% last year to 16.8% of sales, mainly due to higher input costs such as cheese. As a result of lower taxes, net income jumped to $ 84 million, or 10.7% of sales, compared to $ 56 million, or 8.8% of sales, a year earlier.
• Long-term debt has remained stable at just over $ 3 billion.

Comments from the management

President and CEO Rich Allison has made positive comments about the company in its second earnings report since taking office in July. "I continue to be proud of our major franchisees and operators around the world," Allison said in a press release. "Our global business, driven by strong growth in retail sales and economic data from franchisees that outperformed the sector, continued its momentum"

Management noted that this quarter marked the 30th consecutive quarter of positive sales growth in the US market and the 99th consecutive quarter of growth for the international segment.

Looking forward to

The favorable economic conditions mentioned by Allison result from the combination of Domino's good sales volumes and the small footprint required by its distribution centers. This effectiveness is the basis of management's goal of significantly strengthening the chain's presence in the coming years, both at home and in its major international markets. The company hopes to reach up to 8,000 sites in the national market of 5,300 today, partly by attacking the outsourcing market, just as aggressively as the delivery market that she currently dominates.

Nothing in this results report threatens this long-term vision, but the latest indicators suggest that growth will be more difficult to achieve in the coming quarters. The increase in same-store sales slowed to settle at 6.3% in the last nine months, compared with 8.4% for the same period of the previous year.

Similarly, the international segment saw its growth rate decline from 5.1% to 3.3%. These key figures still reflect market share gains for the pizza giant, but they also suggest that management still has work to do to stabilize its operations in a brutally competitive market.