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Domino's (DPZ) Q1 Earnings & Revenues Lag Estimates, Stock Down

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Domino's Pizza, Inc. DPZ reported first-quarter fiscal 2022 results, wherein both earnings and revenues missed the Zacks Consensus Estimate. The bottom line missed the consensus mark for the second consecutive quarter, while the top line lagged the same for the third straight quarter. Following the results, shares of DPZ dipped 3.5% in the pre-market trading session.

Per Domino's CEO Ritch Allison, "We faced a number of headwinds during the first quarter, from the Omicron surge, to staffing shortages, to unprecedented inflation, which pressured our results. We are actively implementing strategies designed to address them; however, we expect some of these headwinds are likely to persist further into 2022.”

Earnings & Revenue Discussion

Domino's reported adjusted earnings per share of $2.50, which missed the Zacks Consensus Estimate of $3.07. Also, the figure declined 16.7% from $3 reported in the prior-year quarter. DPZ’s earnings were hurt by a lower net income (on a year-over-year basis), partially offset by lower weighted average share count owing to share repurchase.

Domino's Pizza Inc Price, Consensus and EPS Surprise

Domino's Pizza Inc Price, Consensus and EPS Surprise
Domino's Pizza Inc Price, Consensus and EPS Surprise

Domino's Pizza Inc price-consensus-eps-surprise-chart | Domino's Pizza Inc Quote

Revenues of $1,011.1 million lagged the consensus mark of $1,017 million. However, the top line improved 2.8% on a year-over-year basis. The upside was mainly driven by higher supply-chain revenues owing to a rise in market basket pricing.

In first-quarter fiscal 2022, Domino's opened 213 stores, comprising 37 net new U.S. stores and 176 net new international stores.

Comps

Global retail sales (including total sales of franchise and company-owned units) inched up 0.3% on a year-over-year basis in the fiscal first quarter. The upside can primarily be attributed to higher international store sales (up 2% year over year). However, sales at domestic stores declined 1.4% on a year-over-year basis. Excluding the foreign currency impact, global retail sales increased 3.6% from the prior-year quarter’s level.

For the fiscal first quarter, comps at Domino’s domestic stores (including company-owned and franchise stores) declined 3.6% from the year-ago quarter’s reading.

At domestic company-owned stores, Domino’s comps declined 10.5% year over year against growth of 6.3% reported in the year-ago period. Domestic franchise stores comps declined 3.2% year over year against an improvement of 13.9% reported in the prior-year quarter.

Comps at international stores, excluding foreign currency translation, were up 1.2% year over year. This was lower than 11.8% improvement in the year-ago quarter.

Margins

Domino’s’ operating margin contracted 310 basis points (bps) year over year to 36.5% for the reported quarter. Net income margin for the quarter came in at 9%, down 300 bps from the prior-year level.

Balance Sheet

As of Mar 27, 2022, cash and cash equivalents totaled $165 million compared with $148.2 million as of Jan 2, 2022. At the end of first-quarter fiscal 2022, Domino’s had $155.8 million of available borrowing capacity under its 2021 variable funding notes, net of letters of credit issued of $44.2 million.

Long-term debt (less current portion) at the end of the fiscal first quarter came in at $5,002.1 million compared with $5,014.6 million reported in the previous quarter. Inventory amounted to $77.7 million compared with $68.3 million at the end of fourth-quarter fiscal 2021.

At the end of the fiscal first quarter, net cash provided by operating activities came in at $78.8 million compared with $152.9 million reported in the prior-year quarter.

For the quarter under review, Domino’s incurred capital expenditures of $12.5 million.

For the fiscal first quarter, DPZ bought back and retired 100,810 shares of its common stock under the share repurchase program. Domino’s stated the availability of $656.4 million under its buyback program. Also, DPZ declared a quarterly cash dividend of $1.10 per share, payable Jun 30, 2022, to its shareholders of record as of Jun 15, 2022.

Zacks Rank & Key Picks

Domino's currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same space are BBQ Holdings, Inc. BBQ, Dave & Buster's Entertainment, Inc. PLAY and Arcos Dorados Holdings Inc. ARCO.

BBQ Holdings currently sports a Zacks Rank #1 (Strong Buy). BBQ has a long-term earnings growth of 14%. The stock has rallied 8.4% in the past year. You can see the complete list of today’s Zacks Rank #1 stocks here.

The Zacks Consensus Estimate for BBQ Holdings’ 2022 sales and EPS suggests growth of 40.9% and 66.2%, respectively, from the corresponding year-ago period’s levels.

Dave & Buster's flaunts a Zacks Rank of 1 at present. PLAY has a trailing four-quarter earnings surprise of 212%, on average. Shares of PLAY have decreased 1.3% in the past year.

The Zacks Consensus Estimate for Dave & Buster's current-year sales and EPS suggests growth of 27.2% and 51.1% each from the respective year-ago period’s levels.

Arcos Dorados is presently Zacks #1 Ranked. ARCO has a long-term earnings growth rate of 31.3%. The stock has soared 35.4% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 16.6% and 66.7%, respectively, from the comparable year-ago period’s levels.


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