Dominoes in Denmark
Dominos pizza attempted to reassure investors Thursday that it has more growth ahead of it, despite having a long-running streak of U.S. top-line sales in the same business.
Investors listened and saw stocks rise 2% in morning trading after falling as much as 5% before the market opened. Ultimately, the shares closed virtually unchanged at $ 477.48.
Domino’s earned $ 3.24 per share for the third quarter, beating the $ 3.11 per share that Refinitiv surveyed analysts had expected.
Despite slowing US sales growth in the same business, analysts found bright spots in the company’s earnings report.
“[U]The nit development continues to be a major growth driver, “wrote BTIG analyst Peter Saleh in a customer announcement on Thursday.[M]The omentum has returned to bring the current pace to 6.5%, margin performance has been more respectable given the sales results, and the company has been aggressively buying back its shares lately. “
The pandemic sparked an exploding demand for Dominos pizza in its home market, but as consumers were vaccinated and restrictions were relaxed, investors became concerned about pizza fatigue. In the last quarter despite difficult comparisons Sales in the US in the same store were still up 3.5%.
However, in the company’s third quarter, domestic same-store sales turned negative for the first time since 2011. US sales in the same store were down 1.9%, even though the metric was up 15.6% on a 2-year basis. StreetAccount expected the company to report 1.8% sales growth in the same store in the US.
CEO Ritch Allison said “a very difficult workforce” is putting US transactions under pressure. For example, some locations had to shorten their opening times. Executives said they are taking steps to improve their work challenges, including introducing a new applicant tracking system and updating franchisees to be the most efficient use of their employees’ time.
“There is no doubt that we will continue to face staffing and other issues with Covid. We also expect the inflationary headwinds to continue to affect Domino’s and the restaurant industry as a whole in the coming quarters, but we will all face these challenges and headwinds. ” from a position of strength, “Allison told analysts.
Allison also said US sales were hurt by the fading effects of the economic controls, which had largely subsided by the third quarter of this year.
The decline in US demand resulted in the pizza chain falling short of Wall Street’s sales estimates. Analysts surveyed by Refinitiv had forecast net sales of $ 1.04 billion, but Domino reported sales of $ 998 million for the quarter.
Outside of the US, the company’s business is doing much better. International same-store sales increased 8.8% for the quarter, up 15% on a two-year basis.
Domino’s shares are up more than 24% this year, reaching a market value of $ 17.6 billion.