Domino's 3rd-Quarter Earnings, Revenue Fall Short of Estimates
Domino's Pizza Inc. (NYSE:DPZ) released third-quarter results before the opening bell on Oct. 8. Earnings and revenue lagged Wall Street's estimates as the company faces stiff competition from delivery services.
By the numbers
Domino's posted earnings of $2.05 per share for the quarter, an increase from $1.95 per share a year ago but short of estimates of $2.07. Revenue grew 4.4% from the prior-year quarter to $820.8 million, which fell short of analysts' expectations of $823.9 million.
At quarter-end, the company had $66.7 million in cash and cash equivalents. Total debt came in at $3.44 billion.
Comparable store sales
The company registered comps growth of 2.4% in the U.S., including company-owned and franchise stores. Wall Street had projected comps growth of 2.8%.
Worldwide comps inched up 1.7%. However, analysts were anticipating a 2.9% increase.
Reflecting on Domino's performance, CEO Ritch Allison said:
"It was a good quarter for Domino's, as we continue to lean on our fundamental strength against a unique competitive environment. Strong unit growth and positive comps yielded a solid and balanced quarter of retail sales growth across both the U.S. and international businesses. We remain steadfastly focused on driving profitable growth for the Domino's system, and most importantly, for our franchisees."
New store openings
In the third quarter, the company opened 246 new stores, of which 43 were in the U.S. and 203 were international locations.
Competition from third-party delivery services
The growing popularity of third-party delivery services like DoorDash and GrubHub (NYSE:GRUB) has hurt Domino's U.S. business considerably. Allison, however, has made it clear the pizza chain will not partner with any delivery services. Instead, the company is employing a strategy called "fortressing," under which it builds more stores in existing markets in order to get closer to consumers and ensure faster deliveries.
Guidance
Domino's also issued a new outlook for the next two to three years. Worldwide retail sales growth is now projected to be around 7% to 10%, which is down from the previous range of 8% to 12%.
While U.S. comps are expected to grow 2% to 5%, international comps are forecasted to increase between 1% and 4%.
Disclosure: I do not hold any positions in the stocks mentioned.
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This article first appeared on GuruFocus.
