Domino’s Pizza’s China operator, DPC Dash, reported its 26th consecutive quarter of same-store sales growth, showcasing resilience even during the pandemic.
Last year, DPC Dash’s revenue reached 3.05 billion yuan ($429.6 million), more than tripling its 2019 figures. The company’s net losses have significantly narrowed, indicating a strong path toward profitability.
HSBC analysts predict that DPC Dash will become net profit positive by 2025, driven by expansion into new markets. DPC Dash, in which Domino’s holds approximately a 14% stake, has ambitious plans to open 200 more stores by the end of the year, building on its current 800 stores in China.
Evolution Exceeding Major Cities
DPC Dash’s strategy entails expanding into smaller Chinese cities, a tactic that has yielded success with four new locations achieving top rankings in global sales within their initial 30 days.
The CEO of DPC Dash, Aileen Wang, emphasized the inherent appeal of new stores to customers, resulting in significant sales without substantial marketing expenses. This approach led to a decrease in advertising and promotional costs to 5.2% of revenue in 2023, down from 5.8% the previous year.
Additionally, the company observed that emerging markets outside of Shanghai and Beijing experienced a twofold increase in revenue in 2023, contributing to over half of the total revenue for the first time.
Western Cuisine’s Growing Popularity
The trend of embracing Western cuisine in China is evident through the expansion of numerous U.S. fast-food chains within the country.
This surge finds support in the escalating income levels among Chinese patrons. Notably, brands such as Papa John’s and Yum China, proprietor of Pizza Hut, are witnessing notable expansion, with Papa John’s boasting 317 franchised outlets in China as of 2023.
McDonald’s, aiming to capitalize on this trend, intends to double its presence to 10,000 stores in China by the close of 2028, showcasing unwavering confidence in the Chinese consumer terrain despite prevailing challenges to consumer sentiment.
Critics Turn Bullish on Chinese Stocks
Wall Street analysts have boosted their outlook on various U.S.-listed Chinese stocks to ‘buy’, reflecting a burgeoning optimism surrounding the Chinese market.
The decision to upgrade these stocks was driven by favorable economic data and earnings reports from Chinese firms, exceeding initial expectations.
Investment experts harbor a notably upbeat outlook on enterprises demonstrating resilience and growth prospects, citing examples like Tencent Music Entertainment, Kingsoft Cloud, and Vnet Group.
This optimism resonates with portfolio managers who recognize the intrinsic value within the Chinese market, notwithstanding prevailing economic challenges.
