While Starbucks has warned of price competition in China and Apple has tried to build momentum with a new store in Shanghai, other American consumer brands are seeing growth and planning more. Domino's Pizza subsidiary DPC Dash in China on Wednesday reported same-store sales growth for the 26th consecutive quarter — including the pandemic period. Last year's revenues of 3.05 billion yuan ($429.6 million) were more than three times what they were in 2019, while net losses shrank to about a tenth of what they were in previous years. “We continue to believe the company will achieve positive net profits in 2025,” HSBC analysts said in a note on Thursday. “Growth from new markets will continue to drive the company's overall growth,” the analysts said. Chinese President Xi Jinping met last week with visiting US executives as part of Beijing's bid to boost foreign investment in China. While advanced technology is the focus of bilateral tensions, the United States and China have said they look forward to cooperating in areas such as climate and tourism. China's huge consumer market, with hundreds of millions of households, remains attractive to many companies. Pizza Push Domino's has a roughly 14% stake in DPC Dash, which listed in Hong Kong about a year ago. The pizza brand opened its 800th store in China in January, and plans to open 200 more by the end of the year. Papa John's, which does not distribute its revenue in China, said it has 317 licensed locations there in 2023, up from 262 the previous year. Outside of North America, the number of Papa John's locations in China is second only to those in the United Kingdom. The company said overall international revenues grew 21% last year. The pizza is also taking off in smaller Chinese cities, topping the global rankings in sales. In 2023, DPC opened the first Domino's stores in 13 cities outside well-known major cities such as Shanghai and Beijing. Four of these new locations have jumped to the top of Domino's global rankings of stores with the most sales in the first 30 days of opening, according to DPC Dash. Locations in China have now made the top 19 spots for best-performing Domino's store openings, she added. A new store in the north-central Chinese city of Xi'an came in first place with sales exceeding 6.3 million yuan during the first 30 days of opening, according to DPC Dash. This was followed by the opening of a new store in the central Chinese city of Changsha, with initial sales exceeding 5.2 million yuan. “We haven't actually spent a lot of marketing money letting people know” about the new stores, Elaine Wang, CEO of DPC Dash, told me in an interview Thursday. “People naturally know and come.” She described it as an inflection point for the company. Advertising and promotion expenses fell to 5.2% of revenue in 2023, down from 5.8% the previous year, DPC said in its 2023 results. The company said new growth markets outside of Shanghai and Beijing saw revenues double in 2023, and in the second half of the year they contributed more than half of total revenues for the first time. She indicated that she had not yet started delivery services for some new stores. As for whether Domino's Pizza is feeling pressure from any caution among consumers, Wang noted that the company has a starting price of 39 yuan ($5.49) per order and a 30% discount every Tuesday and Wednesday. The average sales value per order fell by 7.1% in Shanghai and Beijing in 2023, according to the latest DPC results. “We are certainly cautious on the restaurant sector in FY24E,” Hong Kong-based investment bank CMB International said in a note last week. “But we believe DPC can still gain market share in a declining consumer trade and enjoy a rapid growth boost through expansion into new markets.” DPC is the third-largest pizza brand in China, CMBI analyst Walter Wu said in a separate note. “DBC remains our top choice in the catering sector, thanks to its value-for-money position, significant room for expansion in China, and especially its continued success in new growth markets.” Woo has a Buy rating on DPC Dash and a target price of HK$73.05. HSBC maintained its buy rating on DPC Dash, and cut its price target to HK$71 ($9.07) due to lower expectations on long-term revenue growth. This price target is still 40% higher than where shares closed on Thursday. Accepting Western Foods The Hong Kong Stock Exchange has been closed for Good Friday and will not reopen until Tuesday. The stock exchange will also be closed on Thursday, April 4, for a local Chinese holiday. Mainland stock exchanges will be closed on April 4 and 5 for the holiday. “Chinese people eat pizza,” DPC Dash CEO Wang said. “As income level increases, acceptance increases [of] Western food is on the rise.” Yum China, which owns Pizza Hut in China among other brands, is scheduled to report earnings in late April. McDonald's recently took a larger stake in its China operations, and said in February that it plans to have 10,000 store. in China by the end of 2028. That's nearly double the company's 5,903 stores as of the end of last year. “We're under more pressure,” Christopher J. Kempczinski, the company's CEO, said on the company's latest earnings call, according to a FactSet transcript. “A little bit right now, and that leads to — in the fourth quarter in particular, we saw the environment get a little more promotion,” he said. But he said: “We certainly think we'll continue to see good corporate performance in this market, as consumer wealth and GDP continue to rise.” Growth in medium numbers.”
