Dominos Pizza (NYSE:DPZ)
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5 Years : From Oct 2012 to Oct 2017
Domino's Pizza Inc. (DPZ) is offering medium specialty pizzas like "Honolulu Hawaiian" and "Philly Cheese Steak" for $7.99 each, a new deal that signals the chain is trying to increase the average ticket after advertising $5.99 pizzas for most of the past year.
Domino's will still run the deal for two medium, two-topping pies for $5.99 each, but in recent days has launched the new promotion as an option for customers to spend more, Domino's spokeswoman Lynn Liddle said Tuesday. Customers can also convert one of the two-topping pies to the premium "American Legends" line of specialty pies, which have more toppings, for an extra $2.
Domino's latest deal comes after rival Pizza Hut, a unit of Yum Brands Inc. (YUM), has tinkered with its menu prices, setting prices on nearly all its pies at $8, $10 and $12. The restructured menu replaced a deal offering any pizza for $10.
The new promotions at both Domino's and Pizza Hut highlight attempts to dangle higher-priced deals to their customers without abandoning previous offers. The deals have contributed to sharp gains in same-store sales at each chain built entirely on getting more customer orders, as the average dollar size of each order has dropped.
Investors are skeptical the dramatic traffic gains can continue, heightening the need for growth in average check.
Liddle said the new $7.99 offer, currently promoted online, fits with the chain's strategy of offering low-priced pies to attract customers. Liddle wouldn't comment on whether the deal would be backed with national television advertising.
"I wouldn't see this in any way as an indicator as anything beyond us having value pricing and flexibility to up-sell," Liddle said. "There's no doubt that everyone would love to have a bigger ticket but what we care about most is traffic."
Medium "American Legends" pizza can cost around $13.99 in some markets, making the $7.99 promotion a significant price cut at Domino's. That could make it a more attractive trade-up for consumers shopping for the $5.99 deal.
Domino's launched the $5.99 deal late last year, coinciding with the launch of a revamped pizza recipe in the U.S. with new sauce, cheese and crust. Backed by heavy advertising, the new pizzas have driven dramatic increases in customer orders to Domino's, although the average dollar size of the order is down. Domino's second-quarter U.S. same-store sales increase of 8.8% came despite a decline in the average check.
Domino's shares have surged on the sales gains. They were recently up 1.2% at $13.24, up 58.1% on the year, though down from the 52-week high of $16.32 hit in April.
The pizza giant is also considering launching the new pizza recipe in some international markets.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; email@example.com