Domino’s Misses Estimates, Lowers Forecast

Can Domino’s compete in the age of delivery apps?

Domino’s released its third-quarter earnings report on Tuesday. The report revealed disappointing earnings and sales numbers. Domino’s shares fell by as much as 6% during trading hours on Tuesday…

The stock did rally, however, following Tuesday’s conference call.

Domino’s CEO Ritch Allison said, “It was a good quarter for Domino’s, as we continue to lean on our fundamental strength against a unique competitive environment … We remain steadfastly focused on driving profitable growth for the Domino’s system, and most importantly, for our franchisees.”

Domino’s stock currently has a market value of $10.5 billion and is up 3% year to date. For comparison, competitor Papa Johns is up 31% on the year with a market value of $1.7 billion.

Domino’s Q3 Earnings Highlights

Here are the key numbers from Domino’s Q3 earnings report:

  • Net Sales: $820.8 million, up 4.4%
  • Earnings Per Share: $2.05
  • U.S. Same-Store Sales Growth: 2.4%

The company also said that global retail sales increased by 5.8% and international same-store sales grew by 1.7%. Domino’s also reported net store growth of 214 stores, including 40 new stores in the U.S. and 174 new international stores.

On October 4, the company’s board of directors declared a 65 cent per share quarterly dividend to be paid on December 27, 2019, to shareholders of record as of December 13, 2019.

Share Repurchasing

Domino’s stated in its earnings report that it repurchased and retired 384,338 shares of its common stock for $93.7 million during the third quarter.

The board of directors also authorized a new program to repurchase up to $1 billion of the company’s common stock.

New Financial Outlook

One of the biggest points from this earnings report is the company’s updated financial outlook for the next two to three years. It’s replacing the company’s previous three- to five-year outlook.

Domino’s dropped its expectations for global retail sales growth from 8%–12% to 7%–10%. The company also expects U.S. same-store sales growth to be 2%–5%, down from the previous estimate of 3%–6%. It projects its international same-store sales growth at 1%–4%.

The company reaffirmed its expectations for global net store growth at 6%–8%.

Competition From Delivery Apps

Domino’s explained that its new adjusted financial outlook is due to market uncertainty as well as competition from third-party delivery apps.

In a conference call with investors on Tuesday, Allison stated, “Evolving market conditions and market uncertainty have reduced the relevance of a three-to-five-year outlook.” He went on to reassure investors, “This is not a reactive decision, but a proactive one to make our guidance more meaningful and more relevant to our investors in light of the current competitive landscape.”

In recent years, the growing popularity of food delivery apps like GrubHub, UberEats, DoorDash, and others have put pressure on companies like Domino’s that depend on food delivery as a significant portion of their business.

However, while competitors like Papa Johns and Pizza Hut have partnered with these delivery apps to boost sales, Domino’s has remained consistent in operating independently.

Instead, Domino’s is working on a long-term strategy to reduce delivery times and grow its carryout business by building more stores across the U.S.

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