Domino's (DPZ) Q3 Earnings Beat, Revenues Miss Estimates
Domino's Pizza, Inc. DPZ reported mixed third-quarter fiscal 2023 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top line fell year over year, while the bottom line increased from the prior-year figure. Following the announcement, the stock declined 2.6% in the pre-market trading session.
Earnings & Revenue Discussion
In the quarter, Domino's reported adjusted earnings per share (EPS) of $4.18, surpassing the Zacks Consensus Estimate of $3.29. The figure jumped 49.8% from $2.79 reported in the year-ago quarter.
Revenues of $1,027.4 million missed the consensus mark of $1,052 million and dipped 3.9% on a year-over-year basis. The downside can be attributed to lower revenues from the supply chain and U.S. Company-owned stores. Also, the refranchising of 114 U.S. company-owned stores in Arizona and Utah added to the downside. Supply-chain revenues were hurt by a decline in the company’s market basket pricing to stores and lower order volumes.
In third-quarter fiscal 2023, Domino's had 218 gross store openings and 226 gross store closures.
Domino's Pizza Inc Price, Consensus and EPS Surprise
Domino's Pizza Inc price-consensus-eps-surprise-chart | Domino's Pizza Inc Quote
Comps
Global retail sales (including total franchise and company-owned units) rose 5.3% on a year-over-year basis in the fiscal third quarter. The upside was driven by higher international store sales (up 9.8% year over year). Meanwhile, U.S. store sales inched up 0.9% year over year. Excluding foreign-currency impacts, global retail sales rose 5.1% from year-ago levels.
For the fiscal third quarter, comps at Domino’s domestic stores (including company-owned and franchise stores) decreased 0.6% from the year-ago reading. Our model predicted the metric to tumble 0.8% year over year.
At domestic company-owned stores, Domino’s comps gained 2.9% year over year against a decline of 1.9% a year ago. Our estimate for the metric was 4%.
Domestic franchise store comps fell 0.7% year over year against a 2.2% rise in the prior-year quarter. Our model suggested the metric to decline 1%.
Comps at international stores, excluding foreign currency translation, improved 3.3% year over year against a dip of 1.8% in the prior-year quarter.
Margins
In the fiscal third quarter, Domino’s gross margin expanded 310 basis points (bps) year over year to 38.8%. We estimated the metric to be 39.4%.
Net income margin was 14.4%, up 500 bps from the year-ago quarter. Our estimate was pegged at 11%.
Balance Sheet
As of Sep 10, 2023, cash and cash equivalents totaled $80.8 million compared with $60.4 million as of Jan 1. At the end of third-quarter fiscal 2023, Domino’s had $277.8 million of available borrowing capacity under its 2021 and 2022 variable funding notes, and net of letters of credit issued was $42.2 million.
Long-term debt (less current portion) at the fiscal third-quarter end was $4,931.9 million compared with $4,944.7 million in the previous quarter. Inventory amounted to $69.7 million compared with $65.6 million at the end of second-quarter fiscal 2023.
Capital expenditure in the quarter totaled $59.3 million compared with $38 million in the prior quarter.
During the fiscal third quarter, the company repurchased and retired 229,860 shares for an aggregated cost of $90 million. As of Sep 10, 2023, DPZ stated the availability of $199.5 million under its repurchase program.
Management declared a cash dividend of $1.21 per share. The dividend will be paid out on Dec 29, 2023, to shareholders of record as of Dec 15, 2023.
Zacks Rank & Key Picks
Domino's currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail – Restaurants industry are:
Abercrombie & Fitch Co. ANF flaunts a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 724.8%, on average. Shares of ANF have surged 283.9% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ANF’s 2023 sales and EPS implies increases of 10% and 1,644%, respectively, from year-ago levels.
Arcos Dorados Holdings Inc. ARCO currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 35%, on average. The stock has gained 29.4% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests rises of 19.2% and 13%, respectively, from year-ago numbers.
Yum! Brands, Inc. YUM carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 2%, on average. Shares of YUM have improved 7.9% in the past year.
The Zacks Consensus Estimate for YUM’s 2023 sales and EPS indicates growth of 5.9% and 15.1%, respectively, from year-ago figures.
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