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What Drove Domino’s Pizza’s Revenue in Q3 2018?

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Third-quarter performance

In the third quarter, Domino’s Pizza (DPZ) posted revenue of $786.0 million, a rise of 22.1% from the $643.6 million it reported in the third quarter of 2017.

However, the company’s revenue fell short of analysts’ expectation of $788.1 million due to lower-than-expected SSSG (same-store sales growth).

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Revenue growth

Domino’s year-over-year revenue growth was primarily driven by its adoption of a new accounting standard, which contributed $82.5 million, and its higher supply chain revenue. Increased revenue from its company-owned restaurants and franchised restaurants also contributed to its revenue growth during the quarter. Let’s look at Domino’s revenue growth across its segments.

Domestic company-owned restaurants

The company’s domestic company-owned restaurants posted revenue of $118.5 million, a rise of 5.0% from $112.9 million in the third quarter of 2017. This revenue growth was driven by positive SSSG of 5.0% partially offset by a decline in the unit count due to refranchising. The company operated 386 company-owned restaurants during the quarter compared to 399 in the corresponding quarter of the previous year.

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Domestic franchised restaurants

During the quarter, the company’s domestic franchised restaurant revenue rose 11.4% to $89.4 million. This revenue growth was driven by an increase in royalties and franchise fees due to positive SSSG of 6.4% and the net addition of 273 franchised restaurants in the last four quarters.

Supply chain

During the quarter, the revenue from the company’s supply chain segment rose 10.7% to $45.1 million. This revenue growth was driven by higher supply chain volumes due to the addition of new restaurants and positive SSSG.

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International franchised restaurants

The international franchised segment posted revenue of $50.4 million, a rise of 4.3% from $48.4 million in the corresponding quarter of the previous year. The segment’s revenue growth was driven by an increase in royalties and franchise fees due to positive SSSG of 3.3% and the net addition of 660 franchised restaurants in the last four quarters.

Peer comparison and outlook

For the same period, analysts expect revenues for Papa John’s (PZZA) and Yum! Brands (YUM) to fall 8.8% and 3.8%, respectively.

For the next four quarters, analysts expect Domino’s Pizza to post revenue of $3.69 billion, which represents a rise of 13.9% from its revenue of $3.24 billion in the corresponding four quarters of the previous year. Next, we’ll look at Domino’s Pizza’s third-quarter SSSG.

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