Domino’s reported weaker than expected earnings and revenues for the fiscal fourth quarter, disappointing investors, resulting in decreased confidence and a consequent drop of 6 per cent in the shares of the pizza delivery giant.
“Our long-game approach, driven by fundamentals and the finest franchisee base in QSR across the globe, continues to pace the industry – and we are excited to execute our global strategy in 2019 and beyond,” CEO Ritch Allison said in a statement while announcing the results.
The company reported earnings per share of $2.62 per share while according to a survey of analysts by Refinitiv, the market was expecting an EPS of $2.69. The revenues came in at $1.08 billion compared to expectations of $1.10 billion.
In the same quarter, the pizza chain generated revenues of $111.6 million, or $2.62 per share, which was more than the revenues of $93.3 million, or $2.09 per share in the comparable period a year ago. The tax reform legislation in the US in 2017, resulting in lower rate of taxes was the driver of the increase in revenue and income.,
The company also reported a rise of net sale by 21 per cent at $1.08 billion but was lower than Wall Street Expectations of $1.10 billion. The company attributed the revenue increase to higher sales at company-owned stores in the U.S. and increased revenues from franchise royalties and fee revenues in the US. However there was a decline in revenues from international franchise royalties and fees because of the negative impacts of foreign currency because of strong dollar.
The same-store sales also missed the expectations of analysts. While the company reported a 5.6 per cent growth in same-store sales in the US for those stores that have been operational for more than a year, the expectations of Wall for the growth rate was 6.9 per cent. Domino’s also faltered in the growth in international same-stores sale which came at 2.4 per cent which was much lower than the 4.1 per cent being expected by analysts.
Including 125 new ones in the US, the company opened up a net of 560 stores during the quarter. In recent years, Domino’s has adopted a strategy of aggressive and fast expansion of its stores to ensure reduction in pizza delivery times and allowing its delivery drivers to earn more tips. This strategy was termed as “fortressing” by the company. The total number of stores of Domino’s globally passed the mark of 10,000 international locations in 2018.
Domino’s does not make any forecast for growth or earnings for both quarterly and annual periods. However the company did provide investors and analysts its vision and version of business outlook for the next three to five years. In that part of the reporting, Domino’s executives said that the company anticipated a growth of between 8 and 12 per cent in global retail sales growth and a growth rate of between 3 and 6 per cent in the U.S. same-store sales.
Domino’s also announced an increase in its quarterly dividend by 18 percent to 65 cents.
(Adapted from ChicagoTribune.com)