How Domino's pizza is crushing the competition

Before you go, we thought you'd like these...
Before you go close icon

Domino's Pizza(NYSE: DPZ) is delivering delicious returns for investors: The stock has gained over 50% in the last year, and it's currently trading at fresh historical highs in the neighborhood of $163 per share. This impressive return is fueled by rock-solid financial performance from the business, as Domino's Pizza has a simple and effective recipe for success.

Growth where it counts

Domino's Pizza produced $566.7 million in revenue during the third quarter of 2016, an increase of 17% versus the third quarter in 2015. Same-store sales in the U.S. grew 13% during the quarter, accumulating 22 consecutive years of positive same-store sales in the country. In international markets, same-store revenue increased 6.7%, and the figure has remained positive in the past 91 consecutive quarters. The company opened 316 stores last quarter, ending the period with 13,252 stores around the world, 7,979 of them in international markets.

Check out Domino's burger pizza that had everyone talking:

11 PHOTOS
Domino's Burger Pizza
See Gallery
Domino's Burger Pizza
#Repost @always_rj with @repostapp ・・・ New Chicken Burger Pizza From #Dominos... . . . #foodporn #foodie #foodphotography #mumbaifoodie #puneclickarts #chillkaroyaar #burgerpizza #dominospizza #foodofmumbai #mumbaifoodscenes #foreverhungrymumbai #mumbaifoodilicious #livetoeatbombay
#burgerpizza 😋😋
#burgerpizza from @dominos #pizza Very averagely done with a cozy price tag Taste - 2.5/5 Presentation - 2.5/5 VFM - 1.5/5
The {Not so Good} BURGER Pizza from @dominos is not as great as depicted . It doesn't really satisfy your taste buds. #burgerpizza #dominos #india #newlylaunched #pizza #unsatisfied
Domino's new Burger Pizza ! Go try it... #food #foodie #lovefood #burger #pizza #burgerpizza #dominospizza #chicken #oregano #spicy #foodblogger #nomnomnom #yummyfood #fastfood #cheesy #musttry
Most Awaited! #BurgerPizza #ThatWasDelicious 😋
. #دومينوز_بيتزا في #الهند أعلنوا عن وجبة جديدة وهي #BurgerPizza ! يقولون إن الناس يفضلون أكل البرقر لأنه سريع وما يحتاج الواحد يجلس عكس #البيتزا فجت فكرة 🍕 + 🍔 = BurgerPizza 🙃 . تتوقعون يصير لذيذ؟ 🤔 . المصدر foodbeast.com .
Food is love... Food is life... 😎 #food #foodie #foodlover #burger #pizza #burgerpizza #dominospizza
The all new burgerpizza from @dominos ....i'm dominos fan..but this time got disappointed from this one....not so good thing...lots of unwanted herbs on the top of bun...and the taste of sauce inside bun doesn't satisfy my tastebuds....but u can try it once....😝😀 Completely agree with @alltimebhukkad ..... #burgerpizza #udaipur #food #foodie #instafood #foodies #yum #delish #delicious #igers #photooftheday #rajasthan #pizza #cheese #like4like #recent4recent #dominos #india #dominosindia #udaipurfoodie
#dominos #burgerpizza #pizza #likeforlike #tagsforlike #picoftheday #foodie #foodgasm #foodporn
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION

Profit margins are also moving in the right direction. Operating profit margin increased from 29.3% of revenue to 30.7% of sales. In addition, the company reduced the amount of shares outstanding by 12% year over year via share repurchases. On the back of solid revenue growth, expanding profit margins, and a shrinking share count, Domino's Pizza reported a 43% increase in earnings per share.

This impressive performance comes in times when most other players in the sector are facing considerable difficulties. Based on data from Black Box Intelligence, same-store sales across the restaurant industry declined by 1% during the third quarter, pressured by a 3.4% decrease in traffic. As a reference, competitor Yum! Brands(NYSE: YUM) reported a 1% decline in same-store sales at Pizza Hut during the third quarter, while systemwide sales remained flat year over year.

A rising tide lifts all boats, so even a mediocre business can do well when industry conditions are favorable. But Domino's Pizza is thriving while most competitors are struggling, and this says a lot about the company and its management team.

A simple and powerful recipe

Domino's recipe for success is actually quite simple, yet effective. The company improved its menu in 2010, and management is doing a sound job at driving revenue growth via its loyalty program and digital ordering platforms.

The company's Piece of the Pie Rewards program allows customers to earn points when they order pizzas online, and those points can then be exchanged for free pizzas. Members earn 10 points per day for online orders of $10 or more. After accumulating 60 points, those points can be redeemed for a free medium two-topping pizza. The program is easy to understand, and it rewards repeat customers over big spenders. Focusing on order frequency can be a smart strategy to consolidate loyalty and steal customers away from the competition over time.

Domino's Pizza is an industry leader in digital ordering platforms. Customers can build their profiles and save their favorite orders online, which speeds up the ordering process and also provides valuable information to analyze which menu items are more popular. Customers can order pizzas via all kinds of channels and devices, including Facebook Messenger, Twitter, Amazon Echo, and multiple smartphones and smartwatches, among other possibilities.

The company has even developed a zero-click ordering platform. Customers just need to link the zero-click app to their profile and open it, and as long as there is no change of heart within 10 seconds, the pre-specified order is placed without a single tap, swipe, or click.

According to estimates from Merrill Lynch, Domino's Pizza generated nearly 55% of sales from the digital channel last quarter, while rival Pizza Hut made an estimated 47% of sales online, and the average company in the restaurant industry produces a much lower 20% of revenue from this channel.

Factors such as digital sales and customer loyalty programs are widely recognized as key success drivers in the restaurant industry, so it's not like Domino's Pizza is reinventing the wheel. The main point is successful implementation: The company is doing the important things well, and this is allowing it to drastically outperform the competition.

RELATED: The top fast-food and casual restaurants for 'clean' eating:

8 PHOTOS
Best fast-food and casual restaurants for 'clean' food
See Gallery
Best fast-food and casual restaurants for 'clean' food
FILE - In this March 4, 2015, file photo, an order of McDonald's Chicken McNuggets is displayed for a photo in Olmsted Falls, Ohio. McDonaldâs had signaled changes were in store in late 2014, and the company said it was evaluating the cooking procedures and ingredients for its core menu items. McDonald's said it is testing Chicken McNuggets made without artificial additives and fresh beef instead of frozen beef for some burgers. (AP Photo/Mark Duncan, File)
This Thursday, July 28, 2016, photo shows a Dunkin' Donuts in Edmond, Okla. Already, the emergence of smaller rivals promising more wholesome alternatives has major restaurant chains scrambling to improve the image of their food. But some of the tweaks theyâre making underscore how far they have to go in changing perceptions. Dunkinâ Donuts, for instance, says it plans to put more of a special ingredient in its egg patty: eggs. (AP Photo/Sue Ogrocki)
This Tuesday, June 28, 2016, photo shows a McDonald's sign in Miami. Already, the emergence of smaller rivals promising more wholesome alternatives has major restaurant chains scrambling to improve the image of their food. But some of the tweaks theyâre making underscore how far they have to go in changing perceptions. Convincing people it serves wholesome food is particularly important for McDonaldâs, which has long courted families with its Happy Meals and Ronald McDonald mascot. (AP Photo/Alan Diaz)
FILE - This Tuesday, Jan. 28, 2014, file photo, shows the door at a Chipotle Mexican Grill in Robinson Township, Pa. On Tuesday, April 29, 2014, Chioptle Chief Financial Officer Jack Hartung noted that the chain doesnât currently charge a whole lot more for its steak filling, even though beef costs have climbed considerably. He says Chipotle will widen the price gap between steak and chicken. (AP Photo/Gene J. Puskar, File)
MIAMI, FL - APRIL 27: Chipotle restaurant workers fill orders for customers on the day that the company announced it will only use non-GMO ingredients in its food on April 27, 2015 in Miami, Florida. The company announced, that the Denver-based chain would not use the GMO's, which is an organism whose genome has been altered via genetic engineering in the food served at Chipotle Mexican Grills. (Photo by Joe Raedle/Getty Images)
The Panera Bread Co. logo is seen on a cup of iced tea and a bag arranged for a photograph outside of a restaurant in Torrance, California, U.S., on Monday, Oct. 21, 2013. Panera Bread Co. is scheduled to release earnings figures on Oct. 22. Photographer: Patrick T. Fallon/Bloomberg via Getty Images
Chicken nuggets, french fries, and a fried chicken sandwich are arranged for a photograph during an event ahead of the grand opening for a Chick-fil-A restaurant in New York, U.S., on Friday, Oct. 2, 2015. Chick-fil-A, the Southern chicken-sandwich chain that has drawn both controversy and copycats over the years, has finally arrived in New York. The company will open a 5,000-square-foot (465-square-meter), three-level restaurant in Manhattan's Garment District that will be the chain's largest location in the nation. Photographer: Michael Nagle/Bloomberg via Getty Images
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Andrés Cardenal has no position in any stocks mentioned. The Motley Fool is short Domino's Pizza. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners