‘Irrational pricing’ exists in the delivery marketplace

Domino’s Pizza CEO Ritch Allison on Tuesday expressed confidence in the odds that his pizza chain’s revised outlook will outlast mounting pressure from third-party delivery apps.Venture capital-backed delivery services, such as UberEats and Postmates, that offer users discounts have cut into Domino’s own delivery orders, which led the franchise to reduce its long-term sales guidance after missing earnings and revenue estimates in its fiscal third-quarter report.Domino’s, which handles its own delivery, is facing competition from the growing number of restaurants that can outsource delivery on the app-based services.”We do think there’s some irrational pricing out there in the [delivery] marketplace right now funded by venture capital,” Allison told “Mad Money’s” Jim Cramer in a one-on-one interview. “We don’t know how long that’ll last, but as we look out over the next two to three years, at the revised guidance that we’ve given, we’ve got a terrific business model.”The new forecast replaces Domino’s original three-to-five year outlook. Management predicts sales will grow between 7% and 10% in the next two to three years, down from the previous 8% to 12% prediction.In the September quarter, Domino’s posted U.S. same-store sales growth of 2.4%, which was short of the 2.8% that analysts expected. Revenue also came in short at $820.8 million against estimates of $823.9 million. The company had $86.4 million in profit, which translates to $2.05 earnings per share. However, earnings came in 2 cents lighter than expected, according to FactSet.Despite facing competition in delivery, Allison said Domino’s is “gaining share in the U.S. and across the globe.””Six percent retail sales growth in the U.S. is significantly faster than the growth of the pizza segment and, frankly, faster than the growth of the restaurant category overall,” the CEO said. “International business, when you normalize for currency, up 9.1% retail sales growth, also significantly faster than the category.”While Domino’s came up short for some estimates, shares of the Ann Arbor, Michigan-based pizza company closed up 4.7% at $253.48 on Tuesday.

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