Domino's Delivers Pizza in Nigeria - Analyst Blog

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Domino's Pizza Inc. ( DPZ ) recently started its first store in Nigeria, in association with its master franchisee, Eat 'N' Go Restaurant Group. The group believes that the Nigerian market has immense untapped opportunities for Domino's, and intends to place the brand as a leading one in the region over time.

Eat 'N' Go Restaurant Group boasts significant local market knowledge and has a proven track record of operating quick service, fast casual, fine dining restaurants as well as coffee shops in that market. Further, the group enjoys the status of being the franchisee for another U.S.-based ice cream parlor chain, Cold Stone Creamery, in the African market.

Domino's has been riding on a growth trajectory. It generates more than half of its global retail sales from international stores, constituting over a third of its adjusted operating income. It surpassed 5,000 international Domino's Pizza stores in the recently concluded second-quarter of 2012. Its long-term global retail sales outlook calls for 5-8% growth.

Following the continued traction in the overseas market, as evident by the international same-store sales growth of 5.7% as against 1.7% domestic growth in second-quarter 2012, Domino's intends to further widen its global footprint. Presently, Domino's has its presence in over 70 international markets. The company targets to maintain 3-6% growth in international same-store sales over the long term.

Domino's is not the only quick service restaurant chain to focus on the African region. Another U.S. restaurateur, Yum! Brands Inc. ( YUM ), is also expanding its business in that continent with its KFC brand. Yum Brands is looking to expand mostly outside South Africa, in countries where its presence is negligible. Yum! plans to have about 1200 units in Africa by 2014.

Domino's unit economics remains strong, which in turn aids growth. Moreover, the company's growth model does not involve substantial investments as it concentrates on the master franchise structure.

Domino's currently holds a Zacks #3 Rank, implying a short-term Hold rating. We also reiterate our long-term Neutral recommendation on the stock.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: DPZ , YUM

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