Domino's Pizza Inc. (DPZ, Financial) released second-quarter results before the opening bell on July 16. The company registered stronger-than-expected earnings, but sales failed to meet analyst projections. The pizza chain attributed the weak sales to a disappointing growth rate of comps in the U.S. coupled with stiff competition from delivery services.
By the numbers
The pizza chain reported adjusted earnings of $2.19 per share for the quarter, which climbed 19% from the prior-year quarter and also surpassed Zacks' consensus estimate of $2. Revenue grew 4.1% to $811.6 million, which fell short of analysts' predictions of $836.59 million.
At the end of the quarter, the company had $108.3 million in cash and cash equivalents. Long-term debt amounted to $3.4 billion.
Same-store sales
Domino’s reported same-store sales growth of 3% in the U.S., including company-owned and franchise stores. Wall Street was anticipating comps growth of 4.8%.
Worldwide comps, barring foreign currency translation, surged 2.4%, down from 4% growth in the year-ago quarter.
The second quarter marked the 33rd straight quarter of positive domestic same-store sales growth and the 102nd quarter of consecutive international comps growth.
Store count
In the second quarter, the company opened 200 new stores, of which 42 were in the U.S. and 158 were international locations.
Efforts
To appeal to more customers, Domino’s has been implementing a strategy called “fortressing,” under which it will add more stores in the existing markets with the goal of getting closer to customers. This would further ensure faster deliveries.
However, the downside of the strategy is that it could negatively impact comparable store sales growth.
In addition, the growing popularity of third-party delivery services like Uber Eats, DoorDash and GrubHub (GRUB, Financial) has made customer acquisition a challenge for Domino’s.
Disclosure: I do not hold any positions in the stocks mentioned.
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