Higher prices and more innovation helped Domino's sales improve

The pizza chain’s same-store sales rose 3.6% in the U.S. and its profits improved, sending the company’s stock higher. But the stock quickly turned south later in the morning.
Domino's earnings
Domino's same-store sales rose 3.6% in the U.S. last quarter. / Photo courtesy of Domino's Pizza.

Domino’s sales improved in the first quarter, thanks to a combination of higher prices and more menu innovation, while its profits improved, the company said on Thursday.

Same-store sales, which have been sluggish for the past 18 months, rose 3.6% in the U.S. in the period ended March 26, the company said.

The Ann Arbor, Mich.-based company generated more sales through higher prices and an increase in the price of its core value offers to $6.99 from $5.99. But the company also started playing with its menu, notably through a line of Loaded Tots introduced just before the Super Bowl in February.

“We grew by doing what we said we were going to do: drive value and step up our pace of innovation,” Russell Weiner, Domino’s CEO, said in a statement.

Net income, meanwhile, rose 8.6% to $104.8 million, or $2.93 per share. The earnings per share easily beat Wall Street estimates, according to the website Earnings Whispers, and the company’s stock soared more than 4% in early trading on Thursday. But by mid-morning on Thursday the stock turned starkly south and was down more than 6% by early afternoon.

Domino’s had been struggling over the past two years as consumers shifted away from ordering delivered pizzas and instead made frozen pizza or simply did something else. More of the company’s business shifted to takeout, which is more profitable but generates less overall revenue.

U.S. system sales increased just 1.3% last year, mostly thanks to an increase in unit count, according to the Technomic Top 500 Chain Restaurant Report. That was its worst annual performance since the Great Recession.

The company crossed one notable milestone in the quarter. It opened a net 128 locations in the quarter and now operates more than 20,000 restaurants around the world. That includes 13,300 international restaurants and 6,708 in the U.S.

UPDATE: This story has been updated to reflect the stock price change.

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