On Oct. 8 before the market opened, Domino's Pizza Inc. (DPZ, Financial), a popular pizza chain based in Ann Arbor, Michigan, reported its results for its third quarter of fiscal 2020.
The company recorded better-than-expected results, citing positive comps growth in the U.S. as more customers ordered pizza delivery during the Covid-19 pandemic. However, earnings fell short of expectations due to higher coronavirus-related expenses.
Performance at a glance
The pizza chain posted earnings per share of $2.49 for the quarter, which jumped 21.5% from the prior-year quarter but was below Refinitiv's consensus estimates of $2.79. Revenue grew 17.9% to $968 million, which was above analysts' expectations of $953 million.
Domino's CEO Ritch Allison said the following on the earnings report:
"I am extremely proud of our global franchisees, operators and corporate teams for their relentless passion and energy as we continue to navigate through the pandemic. Our strong third quarter results once again demonstrated our focus on value, service, quality and innovation to meet customer needs."
Despite stiff competition from third-party delivery services, Domino's witnessed strong same-store sales growth of 17.5% in the U.S., including company-owned and franchise stores. Worldwide comps, barring foreign currency translation, inched up 6.2%.
The third quarter marked the 38th straight quarter of positive domestic same-store sales growth and the 107th quarter of consecutive international comps growth.
The pandemic boosted the company's sales, but simultaneously pushed costs higher. Wages of frontline workers were increased, which had a bearing on the bottom line. The rise in sales also meant increased performance-based compensation for higher-level employees and executives.
Store update
In the third quarter, the company opened 83 net new stores, of which net 44 were in the U.S. and 39 were net new international locations.
During the quarter, the company permanently shuttered as many as 126 restaurants, mainly in India. As of Oct. 5, less than 300 international stores were still shut down temporarily.
Financials
At the end of the quarter, Domino's had unrestricted cash and cash equivalents of $330.7 million and total debt of $4.11 billion.
Due to uncertainty caused by the Covid-19 pandemic, the company borrowed $158 million in the second quarter under its variable funding notes. Of the total amount, $100 million was repaid in the second quarter itself, while the remaining amount was paid back in the third quarter.
The Board of Directors of Domino's declared a dividend of 78 cents per share payable to shareholders on Dec. 30.
Guidance
The company did not provide any guidance figures for earnings and revenue.
Disclosure: I do not hold any positions in the stocks mentioned.
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