Domino’s Pizza has demonstrated resilience and adaptability with a 4.4% increase in global retail sales and a 2.7% rise in International same-store sales in the most recent quarter. These results arise from technological innovations including its revamped loyalty program and a focus on tech-enabled carry-out and delivery services.
The company is raising its dividend again and maintains an aggressive share repurchase program. With a robust expansion plan targeting over 1,100 new stores annually, the stock’s valuation of 26.9 times forward earnings forecast seems reasonable.
It certainly doesn’t hurt that Warren Buffett likes the company and now owns about 3.7% of the company. It’s a Power Buy for us.
DOMINO’S PIZZA (New York symbol DPZ; www.dominos.com), gives you exposure to the world’s largest chain of pizza stores offering takeout and delivery. The company (symbol DPZ on New York) operates 21,366 outlets, in the U.S. and 85 other countries. Franchisees run most of these stores.
The firm has a new, prominent investor.
Warren Buffett’s Berkshire Hathaway added Domino’s Pizza to its stock portfolio late last year. The famed investor’s conglomerate bought nearly 1.3 million shares of Domino’s—for a 3.7% stake.
You need to remember that all investors suffer from the same limitation: nobody gets it right every time. But the stocks that Warren Buffett holds are like those we recommend in our newsletters. They are well-established companies with a history of earnings and, in most cases, dividends. They have established their value. They can fluctuate widely and they will, like most stocks, suffer in a long-term market downturn; still, they offer a high probability of long-term growth.
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In the three months ended December 29, 2024, the company’s sales rose 2.9%, to $1.44 billion from $1.40 billion a year earlier. Same-store sales rose just 0.4% in the U.S., while they rose 2.7% internationally. The pizza chain added 775 more restaurants in 2024, about half of which were opened in the fourth quarter. Excluding one-time items, earnings per share rose 9.2%, to $4.89 from $4.58.
Domino’s target of opening more than 925 net new international outlets this year is expected to fall short by about 275 after its Australia-based master franchisee said it was closing low-volume stores in Japan and France. Domino’s is now helping Australian-based Domino’s Pizza Enterprises (DPE) work through some operating issues to improve the performance of its remaining stores. DPE is the brand’s largest franchisee and has more than 3,800 stores in 12 international markets.
Notably, Domino’s international sales overall continue to grow nicely; U.S. sales will rebound as the economy recovers and consumer spending picks back up.
Growth Stocks: Domino’s global expansion heats up with 1,000th store milestone in China
Domino’s Pizza China will soon open its 1,000th location and intends to add 300 to 350 outlets in 2025. Jubilant, a master franchisee based in India, has grown its store count to 5,500 within its regional territory, and aims to work to maintain a strong growth pace.
All in all, the pandemic was a boon for top pizza chains like Domino’s as consumers avoided public spaces and instead opted for delivery and curbside pickup. That boosted Domino’s, which was already outpacing rivals given its commitment to tech-enabled carry-out and delivery. Meantime, those moves are still paying off.
The company is also benefitting from a revamped loyalty program that lets diners redeem rewards more quickly. New products, such as hand-stretched, thin-crust New York-style pizza, are also attracting customers. The company just introduced Mac and Cheese to its menu. That’s the latest addition to Domino’s lineup of pasta dishes, including Chicken Alfredo and Italian Sausage Marinara. The offerings broaden its consumer reach.
The stock trades at a reasonable 26.9 times the $17.45 a share Domino’s should earn in 2025. The company will now raise its quarterly dividend by 15.2% with the March 2025 payment, to $1.74 from $1.51. The shares yield 1.3%.
Recommendation in Power Growth Investor: Domino’s Pizza is a buy.
