Domino’s Pizza (DPZ, Financial) cheered the Street with results that came above analysts’ consensus. The numbers were mainly driven by a strong boost from its overseas market as well as the U.S. market. Its franchisees around the world have delivered solid store growth with consumers embracing its pizza theatre store image. Led by its performance, the stock touched its 52-week high few days back, and now the company seems to be in good shape to carry this growth forward.
Doing well across the globe
Its revenue for the quarter rose 10.5% to $446.6 million from a year ago period, while increased to 63 cents a share compared to 53 cents last year. These are pretty good numbers compared to some of its numbers such as Pizza Hut, which is struggling to make its mark. The company benefited from higher supply chain revenues, which was in turn led by an increase in commodity prices.
In fact, Domino’s has been doing quite well for the past few quarters on account of higher traffic at its restaurant and unit growth. India, Turkey, Japan and U.K. led the way in International store growth, which represents a perfect mix between developed and emerging markets. The company opened its first store in Norway during the quarter and is expected to add two more shortly. Being aware of the fact that, its International business contributes significantly to its balance sheet, the company is committed to increasing its presence overseas that will boost its business in the days ahead.
Focus on technology will be a defining factor
Also in a market with stiff competition, new technology gives you an edge to compete better with your rivals. In this direction, the company is also investing in technology driven initiatives. Apart from digital ordering, Domino’s recently launched a tracking system on Samsung smart TV, which is a step further in innovation that will enable its diners to track their order even while watching their favorite football match.
Similarly, its iPad app in the U.S. has the highest conversion rate and established a new benchmark almost immediately after its launch. And next in line is its voice ordering capabilities, which received great applause with more than 200,000 voice orders since it was introduced in June. Even as its digital order books are improving, innovations such as these will attract new consumers, ultimately strengthening its financials. Its digital leadership is an ongoing story in both domestic and international markets that will define its brand in the days to come.
On the downside, its margins have suffered lately on account of higher commodity costs. Items such as cheese, pork and various other meats have become expensive due to demand imbalance and other macroeconomic factors . The rise in expenses will continue to hurt its margins, at least in the near term, until we see some overall change in commodity prices.
Conclusion
However, in the long run Domino’s seems to be on the right track to deliver year over year growth. It currently has a trailing P/E of 35.71 compared to the industry P/E of 35.86. And its forward P/E looks even more impressive at 29.18 reflecting improvement in its earnings. The stock touched its 52-week high few days back considering its future prospects we could see more upside in the future.
