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While Starbucks warns of price wars in China and Apple looks to gain momentum by opening a new store in Shanghai, other U.S. consumer brands are also feeling growth and planning further expansion. ing. Domino’s Pizza’s China operator DPC Dash reported Wednesday its 26th consecutive quarter of same-store sales growth, including the pandemic period. Last year’s sales were 3.05 billion yuan ($429.6 million), more than three times what they were in 2019, but the net loss was about one-tenth that of previous years. “We continue to believe that the company will return to positive net income in 2025,” HSBC analysts said in a note Thursday. “Growth from new markets will continue to drive overall growth for the company,” analysts said. Chinese President Xi Jinping met with visiting U.S. executives last week as part of Beijing’s efforts to boost foreign investment in China. Although advanced technology has been a focus of bilateral tensions, the United States and China said they aim to cooperate in areas such as climate and tourism. China’s huge consumer market of hundreds of millions of households also remains attractive to many companies. Pizza fan Domino’s Pizza owns about 14% of DPC Dash, which went public 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 did not break out its revenue in China, but said it would have 317 franchised stores in the country in 2023, up from 262 a year earlier. Outside of North America, China has the second-largest number of Papa John’s stores after the United Kingdom. The company said its overall international revenue increased 21% last year. Pizza is also popular in small cities in China, and is ranked globally in terms of sales. In 2023, DPC opened its first Domino’s Pizza stores in 13 cities outside of well-known metropolises such as Shanghai and Beijing. According to DPC Dash, four of these new stores rose to the top of the list of Domino’s worldwide stores with the highest sales in the first 30 days of opening. It also added that stores in China occupied the top 19 places among Domino’s pizza stores with the best performance. According to DPC Dash, a new store in the north-central city of Xi’an ranked first with sales of more than 6.3 million yuan in its first 30 days. A new store was subsequently opened in Changsha, central China, with initial sales exceeding 5.2 million yuan. “We didn’t really spend a lot of marketing money to tell people” about the new stores, DPC Dash CEO Eileen Wang said in an interview Thursday. “People naturally know and come.” She characterized it as a turning point for the company. DPC said in its 2023 financial results that advertising expenses were 5.2% of revenue in 2023, down from 5.8% a year earlier. The company said new growth markets outside of Shanghai and Beijing will double in revenue in 2023, contributing more than half of total revenue for the first time in the second half of the year. He noted that some new stores have not yet started delivery services. As for whether Domino’s Pizza is feeling pressure from consumers’ cautious attitude, Wang said the company has set a starting price of 39 yuan ($5.49) per order and has a 30% discount every Tuesday and Wednesday. He pointed out that he was offering a discount. According to DPC’s latest results, average sales per order decreased by 7.1% in Shanghai and Beijing in 2023. “We are certainly cautious about the catering sector in FY24E,” Hong Kong-based investment bank CMB International said in a note last week. “However, we believe that even amid weak consumption, DPC can still gain market share and enjoy a rapid growth boost from new market expansion.” Walter Wu, an analyst at CMBI, said another In the memo, DPC said it is the third-largest pizza brand in China. “DPC remains our top choice in the catering space thanks to its cost-effective position, significant scope for expansion in China, and consistent success, especially in new growth markets.” Mr. Wu said of DPC Dash’s investment. The company’s rating is “buy” and the target price is HK$73.05. HSBC maintained its investment rating on DPC Dash as “buy” and lowered its price target to HK$71 ($9.07), citing lower long-term earnings growth expectations. This price target is still more than 40% above the stock’s closing price on Thursday. Embracing Western food The Hong Kong Stock Exchange will be closed for Good Friday and will not reopen until Tuesday. The exchange will also be closed on Thursday, April 4th due to a Chinese public holiday. Mainland exchanges will be closed on April 4th and 5th due to public holidays. “Chinese people eat pizza,” said Wang, CEO of DPC Dash. “As income levels rise, acceptance becomes easier. [of] Yum China, which owns Pizza Hut in China among other brands, is scheduled to report financial results in late April. McDonald’s recently further increased its stake in its China operations, announcing plans in February to open 10,000 stores, nearly double the company’s 5,903 stores at the end of last year. “Certainly in China, as we’ve read and seen for many other companies, consumer sentiment in the country is deteriorating,” said Christopher, the company’s CEO, according to FactSet records. “We’re under a little more pressure right now, and as a result, we saw the environment become more conducive, especially in the fourth quarter,” J. Kempczinski said on the company’s latest earnings call. Ta. “We certainly think this market will continue to perform well as consumer wealth and GDP continue to grow at mid-single digits,” he said.
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