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What Led Domino’s 3Q17 Revenues to Outperform Analysts’ Estimates?

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Oct. 17 2017, Published 11:37 a.m. ET

3Q17 revenues estimates

For 3Q17, Domino’s Pizza (DPZ) posted revenues of $643.6 million, outperforming the analysts’ estimate of $627.4 million by 2.6%. DPZ’s 3Q17 revenues rose 13.6% on a YoY (year-over-year) basis.

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Revenue growth

Domino’s generates its revenues from four components: domestic company-owned restaurant sales, franchise fees, and royalties collected from domestic and international franchised restaurants and supply chain operations.

The sales from domestic company-owned restaurants, which forms 17.5% of DPZ’s total revenues, rose 11.8% to $112.9 million in 3Q17, driven by positive SSSG (same-store sales growth) of 8.4% and a net increase of 12 restaurants.

Revenues from domestic franchised restaurants, which makes up 12.5% of DPZ’s total revenues, rose 13.6% to $80.2 million. A net increase of 206 restaurants and a 8.4% rise in same-store sales drove the company’s revenues among domestic franchised restaurants.

Domestic supply chain, which accounted for 62.5% of DPZ’s total revenues, posted revenues of $402.1 million in 3Q17, which represents a 13.3% YoY rise. This revenue growth was driven by a rise in volumes due to an increase in store count and growth in order count at the store level due to positive SSSG.

International franchised restaurants, which accounted for 7.5% of DPZ’s total revenues, posted revenues of ~$48.4 million in 3Q17, which represents a 20.8% YoY rise. This revenue growth was driven by a net addition of 964 restaurants and 5.1% growth in same-store sales.

Peer comparisons and outlook

During the same period, analysts are expecting the revenues of Papa John’s (PZZA) to rise 1.5%, while Yum! Brands’ (YUM) revenues are expected to fall 58.2%. The spinoff of YUM’s China operations in October 2016 appears to have prompted analysts to lower their revenue forecasts for YUM.

For the next four quarters, analysts are expecting Domino’s to post revenues of $3.02 billion, which represents 11.3% growth from the $2.72 billion we saw during the four previous quarters.

Next, we’ll take a closer look at Domino’s SSSG in 3Q17.

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