Domino’s Pizza Inc.'s five-year sales run isn’t slowing down. If anything, it’s speeding up.
The Ann Arbor, Mich.-based company said this morning that its domestic same-store sales rose 7.7 percent in the fiscal third quarter ending September 7. That’s the fourteenth straight quarter of domestic comps growth for the pizza chain. It’s also the best of the bunch.
“It’s the best quarter comps we’ve had since the relaunch” of the pizza recipe in 2009, J. Patrick Doyle, chief executive of Domino’s Pizza Inc., said.
The company’s domestic sales performance came on top of another typically strong quarter of international same-store sales, up 7.1 percent, driving revenues 10.5 percent higher to $446.6 million for the period. Earnings per share, meanwhile, rose 23.5 percent compared with the same quarter last year. Its net income totaled $35.6 million, a 16.3 percent increase compared with the same period last year.
Investors feasted on the news. Domino’s stock rose more than 9 percent Tuesday morning, hitting an all-time high of $83.58 at one point. Domino’s share price has been on a spectacular run over the past five-plus years. Shareholders who bought $1,000 of stock in early January 2009 would have $13,500 today — not counting dividends the chain routinely pays its investors.
Doyle called it “a combination of a number of things.”
“It’s largely ongoing momentum around the brand,” he said. “It’s increasingly strong execution in the restaurants our franchisees and team members are doing. It’s the approach we’ve taken on new product development. Doing fewer, bigger things has been effective for us. Our advertising has been strong. And clearly digital has played a big role in all of this. But the real answer is the sum total of all those things.”
Domino’s also announced today changes to its leadership structure, designed to streamline the organization and enable leadership to make decisions more quickly.
Chief marketing officer Russell J. Weiner was named president of Domino’s U.S.A. Weiner joined the chain in 2008 from Pepsico, and the company credits him with the brand’s domestic turnaround, starting with the 2009 recipe re-launch.
Richard Allison was named president of Domino’s International. Allison has led the international division since 2011, and the chain has added more than 1,800 locations overseas during that period. Both Allison’s position and Weiner’s are newly created roles within the company.
Chief financial officer Michael Lawton, meanwhile, was given the additional responsibility of overseeing Domino’s supply chain division. Lawton, who has been with Domino’s since 1999 and led the international division for six years before Allison’s arrival, will be tasked with improving the supply chain division’s effectiveness, especially on the international side.
“It really comes down to rewarding and recognizing some people that have all three done a phenomenal job of driving results here over the course of the last few years,” Doyle said.
But the leadership change also recognizes the reality that the company is largely two entities in one, its domestic business and its international business—which, in terms of unit count and sales, is actually the bigger of the two, thanks largely to that growth in recent years. “Our international business today is larger than the company was when I joined 17 years ago,” Doyle noted.
Domino’s more recent success has been driven largely by technology improvements. More than a third of Domino’s capital spending goes to technology, executives said on the company’s quarterly conference call Tuesday. Those technology improvements are designed to make it easier for customers to order pizza through various formats.
That includes the company’s new voice ordering app, which was launched in July and generated 200,000 orders even before the company started supporting the system with advertising this month.
More than 40 percent of Domino’s orders now come through various digital channels. That capability generates additional sales —part of the chain’s third-quarter sales growth is due to consumers adding items like chicken to their pizza orders. It also gives the chain a leg up on smaller concepts that can’t devote that kind of investment in digital ordering.
“We are absolutely determined that we’re going to maintain and grow our leadership in digital ordering,” Doyle said. “We’re absolutely not standing still.”
Domino’s performance over the past few years has also helped the chain accelerate unit growth. The company has added a net of 77 new locations in the U.S. over the past 12 months, far more than the 30-unit average for the past four years.
Franchisees are remodeling units too. More than 10 percent of the chain’s 4,600 domestic units have been upgraded to Domino’s new “Pizza Theater” prototype.
Franchisees are more willing to add new units in a chain with strong sales performance, and banks are providing the financing. “Capital is pretty available right now,” Doyle said. “The market for lending and for capital for franchisees has come around nicely.”