Domino's shares jump after earnings beat, shrugging off slowing sales

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Domino’s Pizza on Wednesday reported quarterly earnings that topped analyst expectations but sales that

fell short.

Shares of the company rose 5% in premarket trading.

“It was a good quarter for our U.S. business, and I am very pleased with our balanced retail sales growth, driven by a healthy combination of solid same-store sales and unit growth,” Domino’s CEO Ritch Allison said in a statement.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $2.20 vs. $2.09 expected
  • Revenue: $836.0 million vs. $849.6 million expected
  • Same-store sales growth: 3.9% vs. 4.22% expected

Domino’s reported fiscal first-quarter net income of $92.7 million, or $2.20 per share, up from $88.8 million, or $2.00 per share, a year earlier. Analysts surveyed by Refinitiv expected the pizza chain to earn $2.09 per share.

Net sales rose 6.4% to $836 million, missing expectations of $849.6 million. The company attributed the growth in sales to higher same-store sales and more locations, as well as higher supply chain volumes from higher retail sales.

Sales at stores open at least a year across both its U.S. and international divisions also fell short of estimates. Domino’s reported U.S. same-store sales growth of 3.9%, but Wall Street was expecting the company to report domestic growth of 4.22%. Meanwhile, outside of the U.S., same-store sales increased by 1.8%, less than the 2.43% anticipated by analysts.

The company said in January at its investor meeting that it wants to reach 25,000 global locations by 2025 as part of its “fortressing” strategy, which is meant to decrease delivery times and increase driver tips. But skeptics have said that the strategy will just lead to cannibalization, negatively impacting same-store sales growth.

Heading into the quarter, analysts were largely optimistic. J.P. Morgan and Morgan Stanley upgraded the stock, citing its attractive valuation relative to slower growing peers. However, Cowen analyst Andrew Charles warned in a research note that Domino’s 2019 store openings — part of its fortressing strategy — could be off to a slower start based on the company’s franchise disclosure filing.

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