Domino’s Pizza Inc. (DPZ, Financial) released its fourth-quarter earnings before the opening bell on Thursday.
The Ann Arbor, Michigan-based restaurant chain reported stronger-than-expected earnings and revenue, attributing its strong results to steady comps growth in the U.S. as well as an increase in store count.
By the numbers
The pizza chain posted adjusted earnings of $3.13 per share for the quarter, which jumped 19% from the prior-year quarter and also surpassed Wall Street’s estimates of $2.98. Revenue grew 6% to $1.15 billion, which edged past analysts' expectations of $1.13 billion.
At the end of the quarter, the company had unrestricted cash and cash equivalents of $190.6 million and total debt of $4.11 billion.
Same-store sales
Despite stiff competition from third-party delivery services like DoorDash and UberEats, Domino’s reported same-store sales growth of 3.4% in the U.S., including company-owned and franchise stores. Wall Street was anticipating comps growth of 2.3%.
Worldwide comps, barring foreign currency translation, inched up 1.7%.
The fourth quarter marked the 35th straight quarter of positive domestic same-store sales growth and the 104th quarter of consecutive international comps growth.
Store count
In the fourth quarter, the company opened 492 new stores, of which 141 were in the U.S. and 351 were international locations.
Efforts
The growing popularity of Uber Eats, DoorDash and GrubHub (GRUB, Financial) has made customer acquisition a challenge for Domino’s. Third-party sellers are putting pressure on the company by using smartphone technology and trimming delivery fees in order to lure diners. To combat competition, the company is working to grow its carryout sales as well as open more U.S. locations to cut delivery times.
Domino’s has been implementing a strategy called fortressing, under which it will add more stores in its existing markets in order to get closer to customers. The company firmly believes this strategy will ensure faster delivery. Further, it believes customers will stop ordering from rival food delivery companies once those companies stop providing incentives in an effort to increase profits.
Outlook
The company has provided two-to-three year guidance. The pizza chain anticipates comps growth in the U.S. to be around 2% to 5%. Worldwide retail sales growtrh is projected to be between 7% and 10%.
Disclosure: I do not hold any positions in the stocks mentioned.
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