Investors had some good reasons to expect strong operating results from Domino's (DPZ 1.36%). While the COVID-19 pandemic initially pinched its U.S. business and sent sales lower in China, the pizza delivery specialist was poised to win market share as most of its sit-down competition temporarily closed its doors to diners.
This week, the chain revealed a few metrics describing its growth trends over the last two months, which roughly coincides with maximum lockdown measures in North America. The big picture shows surging sales gains in the U.S., but mixed results in other key markets.
Let's take a closer look.
Image source: Getty Images.
Delivering market share
Comparable-store sales trends hit a new record in late April and early May when growth passed a blistering 20% at existing locations. Investors had expected a boost, given that demand jumped to 7% in the final weeks of the first quarter.
But the scale of that spike was still impressive. Rival Papa John's (PZZA 0.23%) announced similarly impressive numbers, with U.S. sales rising by over 30% through late May .
Domino's management credited the trusted brand and proven delivery-focused model for helping the chain stand out at a time when most peers turned to exclusively carry-out or to-go operations. "We are seeing a tailwind as consumer behavior across the restaurant has shifted toward delivery and carryout," CEO Ritch Allison said in a press release .
Spotty international results
The operating update wasn't all good news. Domino's international business continued shrinking over the first two months of the fiscal second quarter, falling by as much as 17% in early April and declining 12% through that entire period. The chain is still hampered by mandatory closures in places like China and parts of Europe.
Executives said that while some markets are growing at levels that approach the soaring U.S. division, its broader international results will stay pressured by reduced operating hours and a slow reopening pace. About 900 locations outside of the U.S. are still temporarily closed at the time of writing.
Looking ahead
Going forward, the big business questions revolve around how fast food fans will react to the reopening of the restaurant industry. Domino's could see an abrupt end to its sales spike and quickly return to the expansion pace of around 2% it was posting before the pandemic scrambled consumer demand patterns. "We are not sure whether this trend will continue for the remainder of the second quarter," Allison warned investors, "or how long this tailwind might last."
Yet the record sales volumes through mid-May show that Domino's is stepping up to the challenge of satisfying unprecedented demand despite the stress on its supply chain. Sure, a slowdown from its recent 22% revenue spike is inevitable, and sales might even drop slightly as diners take a short break from delivered pizza once the restaurant industry fully reopens.
Domino's still has a good shot at converting many of these new customers into loyal fans. And that promise is just another reason why it looks likely to be a long-term winner from the industry shakeout that's on tap over the next year or so.
