Same-store sales growth
The majority of Domino’s Pizza (DPZ) revenue come from the domestic market in the US, which makes the company naturally sensitive to economic conditions in the US. The US market continues to be solid for Domino’s Pizza, with the company reporting double-digit same-store sales growth during 3Q15.
Growth across all segments
- Domino’s same-store sales growth for 3Q15 was higher across all segments.
- Same-store sales growth from domestic company-operated stores increased 11.5% compared to 6.1%.
- Domestic franchise stores grew 10.4% compared to 7.8% in 3Q14.
- This increase in the domestic market was driven “primarily by traffic,” according to company management.
- This is highly favorable because it tells us that Domino’s products remain desirable to customers. The question remains, how long can the company sustain this double-digit growth?
- Although same-store sales in the domestic segment grew double digits, it is on a declining trend. This indicates lower same-store sales growth expectations in 4Q15 compared to the first three quarters of the year.
- More importantly, the double-digit same-store sales growth may not be sustainable. A high same-store sales growth in 2015 would make it difficult to compare same-store sales growth in 2016.
- Chipotle (CMG), for example, reported double-digit same-store sales growth in 2014. In its 2Q15 quarter, the company reported mid-single-digit same-store sales growth.
- For the International segment, Domino’s same-store sales grew 7.7% from 7.1% in 3Q14.
- The International segment has been growing at a stable rate, with same-store sales growth in this segment growing at a rate of 7% over the past 23 quarters.
Next, we will look at how Domino’s Pizza (DPZ) is preparing to generate more orders.