Domino's cautiously confident on U.S. growth

While the pizza chain anticipates domestic growth, it expects international markets to offer stronger potential for expansion

Domino’s Pizza executives said the chain’s reformulated pizza and international growth fueled third-quarter sales gains throughout the system.

J. Patrick Doyle, chief executive of the 9,541-unit chain, said during a conference call with investors that Domino’s 3-percent domestic same-store sales increase, compared with an 11.7-percent result a year earlier, showed that its recent sales success was more than a temporary spike from introducing a new, reformulated pizza.

“This was a sustained improvement from greater customer frequency and retention,” Doyle said.

Doyle also underscored huge potential for the chain’s international business, which recorded its 71st consecutive quarter of same-store sales increases, with an 8.1-percent gain this quarter compared with a 7-percent increase a year earlier.

Domestic growth, however, will be cautious, the company said, as the overall economy remains tepid and commodity prices hamper efforts to make long-term plans. Domino’s commodities basket price rose 8 percent in the third quarter, chief financial officer Michael Lawton said, including a spike in cheese prices to a high of $2.08 per pound before settling at $1.79, compared with an average of $1.53 in last year’s third quarter.

U.S.: Cautiously confident

Doyle said domestic same-store sales and margins were helped by labor-saving moves like a carryout focus, an in-sourced call center and digital ordering, but he added that the chain was still weighing the effects of other economic factors.

“When cheese spikes above $2 a pound, that has some real short-term impact,” he said. “Our confidence is good, but still a little bit qualified, until we see it flow through more on the bottom line. Financing is there for the larger players, but it hasn’t opened up materially for a new franchisee or somebody with maybe one store looking to open a second.”

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