A Domino's Pizza restaurant in Los Angeles, Calif., on July 18, 2018. The company’s target of opening more than 925 international outlets for the year is expected to fall short.Lucy Nicholson/Reuters
Domino’s Pizza DPZ-N forecast sequentially slower third-quarter comparable sales on Thursday and trimmed its target for new international store openings, sending its shares down 13 per cent.
The company’s target of opening more than 925 international outlets for the year is expected to fall short by about 275 after its Australia-based master franchisee said earlier this week it was closing low-volume stores in Japan and France.
Domino’s Pizza Enterprises is the brand’s largest franchisee and has more than 3,800 stores in 12 international markets, according to Domino’s Australia’s website.
“The market is anxious about risk going forward that this type of headwind will spread to more markets beyond Japan and France,” Northcoast Research analyst Jim Sanderson said.
The company also suspended its target of having 1,100 global net new stores through 2024 to 2028. It currently has more than 14,000 international stores.
For the U.S. market, it expects comparable sales to rise 3 per cent or more in the third and fourth quarters, compared with 4.8 per cent reported in the second quarter.
Domino’s CEO Russell Weiner said Americans continued to look for value. The company has catered to this demand through its refreshed loyalty program and offers such as the carry-out “boost” weeks that provide a 50-per-cent week-long discount.
However, Domino’s will have one boost week each in the third and fourth quarters, compared with two boost weeks in the reported period.
“It’s a little bit of a surprise … I think we were assuming that the level of promotional intensity would probably kind of maintain the same cadence across all different quarters,” said Danilo Gargiulo, senior analyst at Bernstein.
The company missed expectations for U.S. and international same-store sales by a small margin.
Still, lower supply-chain costs helped the company earn a profit of $4.03 a share, compared with estimates of $3.68, according to LSEG data.