Restaurants

Domino's Pizza CEO says uncertainty around the fate of third-party delivery led to slashed outlook

Key Points
  • Domino's announces a new outlook, covering the next two to three years, that replaces its prior outlook for the next three to five years.
  • The pizza chain lowers its expected sales growth to a range of 7% to 10% from a previous range of 8% to 12%.
  • Domino's is focused on building more U.S. stores in order to decrease delivery times and grab more market share from its rivals.
Dominos Pizza delivery scooters
Jaap Arriens | NurPhoto | Getty Images

After Domino's Pizza slashed its outlook for sales growth for the next two to three years, company executives said Tuesday that market uncertainty and competition from third-party delivery aggregators led to the changes.

"Evolving market conditions and market uncertainty have reduced the relevance of a three-to-five-year outlook," CEO Ritch Allison told investors on the conference call.

Shares of the company, which opened down more than 5%, turned positive on Allison's comments. The stock is now trading up 2%.

The new outlook, which covers the next two to three years, replaces its prior outlook for the next three to five years.

"It's not a reactive decision, it's a proactive decision to change the structure of the guidance," Allison said.

Domino's lowered its expected sales growth to a range of 7% to 10% from a previous range of 8% to 12%.

It also lowered its long-term forecast for both domestic and international same-store sales growth. The pizza chain now expects U.S. same-store sales growth in a range of 2% to 5%, down from a prior range of 3% to 6%. The outlook for international same-store sales growth was slashed from a range of 3% to 6% to a range of 1% to 4%.

The pizza chain still expects net store growth over the next two to three years of between 6% to 8%.

Domino's U.S. business has faced pressure from third-party delivery apps such as GrubHub and UberEats, which offer other fast-food competitors such as McDonald's the opportunity to have their food delivered to customers. Such apps are able to lure customers through free delivery and other discounts, which Allison has said is not sustainable.

To compete with delivery aggregators, Domino's has focused on a long-term strategy that involves building more U.S. stores to decrease delivery times and make its carryout business more attractive to customers.

Allison said there is a "significant shakeout coming to the industry," offering Domino's the opportunity to grab more market share from rivals such as Papa John's and Yum Brands' Pizza Hut, which have turned to third-party delivery. Shares of Papa John's tumbled about 5% Tuesday morning. Yum's stock ticked down 1%.

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