Domino's Reports Mixed Q3, Scales Back Growth Expectations For 2024 As Economic Headwinds Bite

Domino’s Pizza Inc DPZ shares are trading higher after the company reported third-quarter results.

The company reported sales growth of 5.1% Y/Y to $1.08 billion, missing the analyst consensus estimate of $1.10 billion.

The revenue increase was primarily driven by higher supply chain revenues, U.S. franchise advertising, and U.S. franchise royalties and fees. 

The growth in supply chain revenues was aided by higher order volumes, and an increase in the company’s food basket pricing to stores.

Global retail sales increased 5.1%, excluding the impact of foreign currency. Same-store sales in the U.S. grew 3.0%, while International same-store sales (excluding foreign currency impact) increased 0.8%.

Gross margin for the quarter expanded to 39.2% from 38.8% a year ago. U.S. company-owned store gross margin rose by 1.0 percentage point, driven by higher customer transaction counts.

Supply chain gross margin increased by 0.6 percentage points, primarily due to procurement productivity.

Operating margin for the quarter rose to 18.6% from 18.3% a year ago quarter. EPS of $4.19 beat the consensus estimate of $3.68.

Operating cash flow for the nine months totaled $446.9 million, with a free cash flow of $376.1 million. Domino’s held $464.53 million in cash and equivalents as of September 8.

Also Read: This Domino’s Pizza Analyst Cuts Forecasts Ahead Of Q3 Results

Dividend: On October 8, the company’s Board of Directors declared a $1.51 per share quarterly dividend on its shares for shareholders of record as of December 13, payable on December 27.

In the third quarter, the company repurchased shares worth $190.0 million. As of September 8, the company had $926.3 million remaining under its authorized share repurchase program. The company had a global net store growth of 72 stores in the quarter.

Russell Weiner, Domino’s Chief Executive Officer, said, “In the U.S., we drove our 4th straight quarter of profitable order count growth, highlighting that our strategies are driving positive outcomes. The Hungry for MORE pillar of Renowned Value will be the primary focus for our business in near-term as we look to continue to create our own tailwinds around the world.”

Guidance: Given the challenging macroeconomic environment and its impact on current business trends, for 2024, Domino’s Pizza projects 6% annual global retail sales growth and 8% growth in income from operations for 2024, along with a net addition of 800 to 850 stores globally.

Earlier, the company expected 7%+ annual global retail sales growth and 8%+ annual income from operations growth for 2024 – 2028. It had expected global net store growth of 825 to 925 in 2024.

For 2025, the company expects sales and income growth to be similar to 2024 levels.

Meanwhile, for 2026-2028, Domino’s maintains its forecast of 7%+ annual global sales growth and 8%+ annual income growth.

Investors can gain exposure to the stock via AdvisorShares Restaurant ETF EATZ and The Advisors’ Inner Circle Fund III Strategas Global Policy Opportunities ETF SAGP.

Price Action: DPZ shares are up 1.16% at $418.00 premarket at the last check Thursday.

Photo via Shutterstock

Read Next:

• S&P Settles At Record High As Apple, Amazon Shares Surge: Investor Optimism Improves Ahead Of Inflation Data