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Domino’s CFO: Our New Expansion Strategy Hurt Comparable Sales in 2018

Danni Santana
Domino’s CFO: Our New Expansion Strategy Hurt Comparable Sales in 2018

Fortressing, Domino’s real estate and delivery strategy, caused same-store sales to dip in 2018, according to the company. But the chain remains unbothered with both net sales and order counts rising.

At its annual investor day, Thursday, Domino’s said comparable store sales fell as much 1.5 percent for franchised and company-owned stores due to the pizza chain’s aggressive expansion strategy, which included 232 new locations in the third quarter alone.

The decline will not keep Domino’s from building more locations globally, however, over the next five years or so, Jeff Lawrence, Domino’s CFO said. The brand eyes growing its store footprint by at least 2,000 units in the U.S.; 3,500 in Brazil, Russia, India, and China; and by 3,000 locations in 15 other international markets.

Domino’s estimates same-store sales will reach 7.1 percent in 2018, down from 7.7 percent from the year prior. The company does project comparable store sales will rebound by 3 to 6 percent by 2022. And by 2025, global retail sales should also reach $25 billion.

“The end goal [through fortressing] is double-digit retail sales growth. That’s kind of the prize,” Lawrence said, adding that EBITDA in the U.S. has tripled in the past decade, while order counts have more than doubled to 310 million per year due to the strategy.

Fortressing also “gives you the opportunity to close the competition as well,” said CEO Richard Allison. “We saw that in India.”

Domino’s COO Russell Weiner boldly added, “We look at all of our investments, but to be a little funny here, it really doesn’t matter to us,” he said. “Why doesn’t it matter to us? If you can win in the short term, while setting yourself up for the long term, that’s a good win. Plus, what’s higher [among competitors] than the 7.1 percent [in comp sales] we have?”

More 2019 Plans

Domino’s is taking on a couple of projects this year, aside from fortressing. The biggest is the opening of a new innovation lab in its hometown of Ann Arbor, Mich. by the summer.

The company also plans to debut a new point of sale system that better integrates its e-commerce and mobile capabilities, as well as open two more supply chain warehouses in South Carolina and Texas.

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