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I’ve written a fair amount here about Chipotle Mexican Grill’s (NYSE: CMG) winning formula of food that’s convenient, affordable and healthy.
But as Domino’s Pizza (NYSE: DPZ) reminded us in its latest third-quarter earnings report, there’s still a very strong market for fast food that’s not branded as “healthy.” Domino’s revenue grew 8.5% in the third quarter, while net income grew 6.2%.
I should note from the outset that I’m not really making a judgment about the nutritional value of a slice of pizza versus that of a burrito. It’s possible at most restaurants to assemble a meal that’s healthy or not so healthy, depending on what you order and the portions you consume. Still, since Chipotle has distinguished itself for its healthy ingredients, it’s not your traditional fast-food retailer.
Domino’s, on the other hand, is more what people think of when they think about fast food, including fast food that’s delivered to your doorstep. It’s a mature business that’s more than 50 years old and has close to 12,000 company-owned and franchised restaurants in the United States and around the world.
And yet, even with significant competition from other pizza chains and other fast-food restaurants, Domino’s is continuing to grow at an impressive clip. It added close to 200 stores in the third quarter.
It’s also worth noting that Domino’s is not deriving its growth simply from expanding into distant markets. Its domestic same-store sales rose 10.5% in the latest quarter.
Domino’s Pizza stock rose $2.74 to $105.38 on Friday, a day after Domino’s earnings were reported, capping what’s been an extended period of strong growth. Over the past five years, the stock has grown by more than 600%. So far this year, it’s risen close to 12%.
Many of the stocks we write about here have complex stories of turnaround plans or slowing growth or disruption in their industries. But Domino’s stock reminds us that some of the best investment stories are pretty simple, based on sustained demand for a tried and true product and a company management that’s deftly overseen the growth and expansion.
Domino’s faces stiff competition from many fronts these days, but it continues to serve repeat customers and reach new ones. It might not be able to sustain this level of growth forever, but for now it looks to be on a roll that’s not going to slow down anytime soon.
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