Fast-food pizza chain Domino’s (NYSE:DPZ) fell short of the market’s revenue expectations in Q3 CY2024, but sales rose 5.1% year on year to $1.08 billion. Its GAAP profit of $4.19 per share was 15.2% above analysts’ consensus estimates.
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Domino's (DPZ) Q3 CY2024 Highlights:
- Revenue: $1.08 billion vs analyst estimates of $1.10 billion (1.6% miss)
- EPS: $4.19 vs analyst estimates of $3.64 (15.2% beat)
- 2024 Guidance: 6% global retail sales growth (miss vs. expectations of about 7%)
- Gross Margin (GAAP): 28%, in line with the same quarter last year
- EBITDA Margin: 23.3%, up from 20.2% in the same quarter last year
- Free Cash Flow Margin: 13.5%, down from 15.4% in the same quarter last year
- Locations: 21,002 at quarter end, up from 20,197 in the same quarter last year
- Same-Store Sales rose 3% year on year (1.3% in the same quarter last year)
- Market Capitalization: $14.45 billion
Company Overview
Founded by two brothers in Michigan, Domino’s (NYSE:DPZ) is a globally recognized pizza chain known for its creative marketing and fast delivery.
Traditional Fast Food
Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.
Sales Growth
A company’s long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years.
Domino's is one of the larger restaurant chains in the industry and benefits from a well-known brand that influences consumer purchasing decisions. However, its scale is a double-edged sword because it's harder to find incremental growth when you've already penetrated the market.
As you can see below, Domino’s 5.6% annualized revenue growth over the last five years (we compare to 2019 to normalize for COVID-19 impacts) was tepid, but to its credit, it opened new restaurants and increased sales at existing, established dining locations.
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This quarter, Domino’s revenue grew 5.1% year on year to $1.08 billion, missing Wall Street’s estimates. Looking ahead, sell-side analysts expect sales to grow 7.4% over the next 12 months, an acceleration versus the last five years.
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Same-Store Sales
A company’s same-store sales growth shows the year-on-year change in sales for its restaurants that have been open for at least a year, give or take. This is a key performance indicator because it measures organic growth and demand.
Domino’s demand within its existing restaurants has been relatively stable over the last eight quarters but fell behind the broader sector. On average, the company’s same-store sales have grown by 2.3% year on year. With positive same-store sales growth amid an increasing number of restaurants, Domino's is reaching more diners and growing sales.
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In the latest quarter, Domino’s same-store sales rose 3% year on year. This growth was an acceleration from the 1.3% year-on-year increase it posted 12 months ago, which is always an encouraging sign.
Key Takeaways from Domino’s Q3 Results
It was good to see Domino's beat analysts’ EPS expectations this quarter. On the other hand, its revenue unfortunately missed analysts’ expectations. Another disappointing dynamic was guidance, with the company calling for 6% global retail sales growth, which slightly missed expectations. Overall, this quarter could have been better. The stock remained flat at $412.98 immediately after reporting.
Domino’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.