Revenue That Beats Expectations – That’s What Domino’s Deliver

Pratik is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The quarterly results of Domino’s Pizza (NYSE: DPZ) are out and the company posted revenue of $378.08 million which beat Wall Street’s expectation of $374.6 million. The net income rose to $25.98 million providing 44 cents per share while Thomson Reuters expected 41 cents per share. Global retail sales of the company grew by 8.4%. Making the investors happy the stock gained 7% on the index.

Reaching “Taste Buds”

To increase its market share internationally the company opened 121 new outlets abroad last quarter. As on September 9 the company operated 10,040 outlets worldwide, crossing the landmark of 10,000. India is their fastest growing market and it is present in more than 400 locations there. On similar lines, McDonald’s Corporation (NYSE: MCD) is even tapping Indian markets and considering all possible options. It opened its first ever full vegetarian restaurant there given the preferences of the Hindu population.

On one side international business of Domino’s grew by 5% while on the other it only grew by 3.3% in the U.S. As per Mike Lawton (CFO), Domino’s opened only 10 new outlets domestically. The increase in revenue was primarily driven by higher average sales due to new products and marketing promotions.

Patrick Doyle (CEO) mentioned about the recent launch of pan pizza in the market. The version was launched earlier also but it did not do well. It took them 3 years to get the recipe right. Key reason for focusing on the pan pizzas is the fact that 1 in every 5 pizza’s sold is pan style. Also, Yum! Brands(NYSE: YUM) Pizza Hut, Domino’s arch rival, is taking away major business here. Pizza Hut is also giving stiff competition here by focusing on the business of delivering pizza’s through pizza hut delivery (PHD). Through PHD, Yum Brands has been shifting focus from its dine-in concept.

Road Ahead...

The yummy pizza maker is making a number of amazing moves which is expected to help the company going forward. Its 121 new stores will help boost the top line further. In fact, its expansion initiatives does not stop here. It is eying further store expansion in the international markets which can prove to be beneficial, especially because of great demand in emerging markets such as India and China.

Moreover, continuous product innovation is a large driver of its results. It's new pizza recipes and new additions such as artisan style pizzas and pan pizzas have helped the company become a consumer favorite. Since pan pizza was rolled out recently, the company is yet to realize its full benefits. Also, its pizzas are competitively priced and are being advertised heavily which will attract consumers.

Domino's cost cutting measures have started bearing fruit and is expected to benefit the bottom line further. Additionally, Domino's business model which is focused on franchising is a great one since it reduces the cost burden of the company.

What to Order?

The company is setting new benchmarks for itself, and is moving in the right direction. Its cost cutting efforts are well demonstrated by its expanding margins. With the new pan pizzas rolled into the market the company has more to offer for pizza lovers. Investors can cash in from its international expansion and increase in global demand.

And for the order – get me a pepperoni pan pizza please…..

Prat369 has no positions in the stocks mentioned above. The Motley Fool owns shares of McDonald's. Motley Fool newsletter services recommend McDonald's and Yum! Brands. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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