Domino's Growth Strategies Paying Off, But Goldman Sachs Analyst Warns Of Competitive Pressures Ahead

Goldman Sachs analyst Teddy Farley expressed views on Domino’s Pizza Inc‘s DPZ mixed third-quarter results reported on Thursday.

The company reported third-quarter sales growth of 5.1% Y/Y to $1.08 billion, missing the analyst consensus estimate of $1.10 billion. EPS stood at $4.19, above the consensus of $3.68.

The revenue boost came from higher supply chain revenues, U.S. franchise advertising, and franchise royalties and fees. Increased order volumes and higher food basket pricing also contributed to the supply chain growth.

Domino’s Pizza revised its 2024 projections due to the challenging macroeconomic environment. The company now expects 6% global retail sales growth and 8% income from operations growth, with a net addition of 800 to 850 stores globally.

For 2025, the company expects sales and income growth to align with 2024 levels while maintaining its forecast of 7%+ sales growth and 8%+ income growth for 2026-2028.

The analyst has a Buy rating on DPZ with a 12-month price target of $515.

Farley notes DPZ has multiple strategies to drive revenue growth, including sustained benefits from the revamped rewards program, gains in carryout market share, and the ongoing expansion of third-party delivery partnerships.

However, the analyst is cautious that the slower-than-expected impact from the fortressing strategy and rewards program may limit franchisee sales, margins, and future domestic unit expansion.

Additionally, Farley points out that a quicker recovery by key competitors or increased competition from fast-casual pizza chains could affect Domino’s market share and same-store sales growth.

Moreover, challenges in expanding into key international markets like China and India, along with potential slowdowns in master franchisee regions, could also weigh on global growth.

Price Action: DPZ shares are trading higher by 0.23% at $414.15 at the last check Thursday.

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