February 21, 2019 / 12:36 PM / 5 months ago

Domino's hurt as delivery firms offer more choice, shares fall 10 percent

(Reuters) - Domino’s Pizza Inc missed analysts’ estimates for quarterly same-store sales on Thursday, sending its shares down 10 percent and underscoring pressures the company is facing from food delivery startups that are offering diners more choices.

FILE PHOTO - A Domino's Pizza restaurant is seen in Los Angeles, California, U.S. July 18, 2018. REUTERS/Lucy Nicholson/File Photo GLOBAL BUSINESS WEEK AHEAD

The largest U.S. pizza chain has been investing in technology to simplify its ordering process and to cut delivery times to below 30 minutes but, like other fast-food chains, faces the threat from delivery “disruptors” such as GrubHub, DoorDash and UberEats.

“Investors will focus on the ongoing difficult U.S. compares...and the increased prevalence of delivery across the U.S. restaurant landscape, all of which are unlikely to subside near-term,” said Jeffrey Bernstein, an analyst with Barclays.

Same-store sales at Domino’s company-owned U.S. outlets rose 3.6 percent, the slowest pace in at least four years, while franchises posted a 5.7 percent growth in the fourth quarter, both well below Wall Street expectations.

Earlier this month, Yum Brands’ Pizza Hut reported no growth in same-store sales as stiff competition hit dine-in customer visits.

Domino’s same-stores sales were also impacted as New Year’s Eve - a key day for pizza sales - shifted from the fourth quarter to the current quarter.

The company’s strategy of adding stores in areas where it had a large presence likely skewed delivery sales towards the new outlets hitting same-store sale comparisons, analysts said.

“Same-store sales performance can certainly improve versus what we have all come to expect,” Chief Executive Officer Richard Allison said on a post-earnings call.

The company missed profit expectations for the first time in at least nine quarters as investments in technology led to a 15 percent jump in expenses in the last three months of 2018.

International same-stores sales growth also fell short of estimates, coming in at 2.4 percent compared with expectations of 4.14 percent. The company, which operates over 10,000 outlets in international markets, blamed weakness in some markets in Europe and the Pacific region.

Total revenue rose to $1.08 billion, but missed the average analyst estimate of $1.10 billion.

Shares of the Ann Arbor, Michigan-based company, which have gained about 12 percent since the start of the year, were down 9.7 percent at $251.61.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Saumyadeb Chakrabarty and Sriraj Kalluvila

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