ANN ARBOR, Mich. — Domino’s Pizza is sticking with its aggressive growth plans — and its own army of U.S. delivery drivers — despite mounting pressure from services like UberEats and DoorDash.
The world’s biggest pizza chain is rapidly opening new stores in order to shorten delivery times, increase carryout business and push out weaker competitors like Pizza Hut and Papa John’s. The company has opened 1,174 new stores worldwide over the last year; it opened nearly 250 stores in the July-September period.
“We’ve got a unique opportunity right now to solidify market share gains for the long term,” CEO Ritch Allison said in a conference call with investors. “We firmly believe that now is the time to go on offense.”
But in the short term, those new stores are cannibalizing existing locations. On Tuesday, Domino’s Pizza Inc. reported its fourth consecutive quarter of declining same-store sales in the U.S. Sales at U.S. stores open at least a year rose 2.4%, shy of the 2.7% growth Wall Street had anticipated, according to analysts polled by FactSet.
Third-quarter net income rose 3% to $86.4 million, or $2.05 per share, 2 cents short of Wall Street forecasts. Revenue rose 4% to $820.8 million, also lower than expected, according to FactSet.
Domino’s was a pioneer in recognizing the value of getting food to the doorstep of customers fast.
But it’s facing an onslaught of startups that are offering rebates to use their delivery services from thousands of smaller, local pizzerias and other types of restaurants, including national fast food chains like McDonald’s.
Allison said companies like GrubHub are currently pricing delivery below what it actually costs, thanks to subsidies from investors. But he thinks that model will eventually collapse.
“We believe that a significant shakeout is coming to the industry,” he said.
But in the meantime, the company is tightening its outlook. On Tuesday, Domino’s introduced a new two-to three-year outlook, replacing its three- to five-year one. In that new time frame, the company expects U.S. same-store sales growth between 2-5%, international same-store sales growth between 1-4% and global retail sales growth between 7-10%.