Domino’s Pizza, Inc.


DPZ

reported second-quarter fiscal 2022 results, with earnings and revenues missing the Zacks Consensus Estimate. The bottom line missed the consensus mark for the third consecutive quarter, while the top line lagged for the fourth straight quarter. Following the results, shares of DPZ dropped 2.9% in the pre-market trading session.

Russell Weiner, Domino’s Chief Executive Officer, stated, “Our results for the quarter faced challenges consistent to those I outlined back in April. We continued to navigate a difficult labor market, especially for delivery drivers, in addition to inflationary pressures combined with COVID and stimulus-fueled sales comps from the prior two years in the U.S.”

Earnings & Revenue Discussion

Domino’s reported adjusted earnings per share of $2.82, which missed the Zacks Consensus Estimate of $2.88. Also, the figure declined 9.6% from $3.12 reported in the prior-year quarter. DPZ’s earnings were hurt by a lower net income (on a year-over-year basis), partially offset by a lower weighted average share count owing to share repurchase.

Revenues of $1,065.2 million lagged the consensus mark of $1,066 million. However, the top line improved 3.2% on a year-over-year basis. The upside was mainly driven by higher supply-chain revenues owing to a rise in market basket pricing. However, this was partially offset by lower supply chain volumes.

In second-quarter fiscal 2022, Domino’s opened 233 stores, comprising 22 net new U.S. stores and 211 net new international stores.

Comps

Global retail sales (including total franchise and company-owned units) declined 3% on a year-over-year basis in the fiscal second quarter. The downside can primarily be attributed to lower international store sales (down 5.4% year over year). Sales at domestic stores declined 0.6% on a year-over-year basis. Excluding the foreign currency impact, global retail sales increased 1.5% from the prior-year quarter’s level.

For the fiscal second quarter, comps at Domino’s domestic stores (including company-owned and franchise stores) declined 2.9% from the year-ago quarter’s reading.

At domestic company-owned stores, Domino’s comps declined 9.2% year over year compared with a decline of 2.6% reported in the year-ago period. Domestic franchise store comps declined 2.5% year over year against an improvement of 3.9% reported in the prior-year quarter.

Comps at international stores, excluding foreign currency translation, were down 2.2% year over year. This was lower than the 13.9% improvement reported in the year-ago quarter.

Margins

During the fiscal second quarter, Domino’s’ gross margin contracted 320 basis points (bps) year over year to 36.3%. Net income margin for the quarter came in at 9.6%, down 170 bps from the prior-year level.

Balance Sheet

As of Jun 19, 2022, cash and cash equivalents totaled $114.4 million compared with $165 million as of Mar 27, 2022. At the end of second-quarter fiscal 2022, Domino’s had $155.8 million of available borrowing capacity under its 2021 variable funding notes, net of letters of credit issued of $44.2 million.

Long-term debt (less current portion) at the end of the fiscal second quarter came in at $4,989.6 million compared with $5,002.1 million reported in the previous quarter. Inventory amounted to $70.2 million compared with $77.7 million at the end of first-quarter fiscal 2022.

Capital expenditures during the quarter came in at $32.7 million compared with $12.5 million reported in the previous quarter.

For the fiscal second quarter, DPZ bought back and retired 148,248 shares of its common stock under the share repurchase program. Domino’s stated the availability of $606.4 million under its buyback program. Also, DPZ declared a quarterly cash dividend of $1.10 per share, payable Sep 30, 2022, to its shareholders of record as of Sep 15, 2022.

Zacks Rank & Key Picks

Domino’s currently carries a Zacks Rank #3 (Hold). You can see


the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks

Retail-Wholesale

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,

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and

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PBPB

.

Dollar Tree sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 13.1%, on average. Shares of the company have gained 74.9% in the past year.

The Zacks Consensus Estimate for Dollar Tree’s 2022 sales and earnings per share (EPS) suggests growth of 6.7% and 40.5%, respectively, from the year-ago period’s levels.

Designer Brands sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 102.5%, on average. Shares of the company have declined 1.1% in the past year.

The Zacks Consensus Estimate for Designer Brands’ 2023 sales and EPS suggests growth of 6.9% and 16.5%, respectively, from the year-ago period’s levels.

Potbelly carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 26.2%, on average. Shares of the company have declined 21.1% in the past year.

The Zacks Consensus Estimate for Potbelly’s 2022 sales and EPS suggests growth of 14.6% and 94.2%, respectively, from the year-ago period’s levels.

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