Domino’s Pizza Inc.’s stock dropped 11% on Thursday after the pizza delivery company’s better-than-expected profit in the fiscal second quarter was overshadowed by a miss on revenue.
The Ann Arbor, Mich.-based company DPZ, -13.45% also said it had problems with a master franchisee that caused restaurants to close in Japan and France. This means that Domino’s won’t be able to meet its goal for global net new store openings this year.
For the quarter ending June 16, Domino’s made $141.9 million, or $4.03 per share. This is more than the $109.4 million, or $3.08 per share, it made during the same time last year. The amount of money made went up from $1.25 billion to $1.98 billion.
FactSet believed that the company would make $1.103 billion in sales and earn $3.68 per share.
Same-store sales in the U.S. went up 4.8%, when FactSet thought they would only go up 3.1%.
As planned, CEO Russell Weiner said, “For the second straight quarter, we drove U.S. comp performance in the healthiest way possible: through profitable order count growth.” “We had good order counts in both our delivery and carryout businesses, and that was true for people of all income levels.”
When foreign exchange rates are taken into account, global retail sales growth, which is the sum of all retail sales at company-owned and franchise stores around the world, rose 7.2%.
During the quarter, the business added 175 net stores. There are more than 20,000 Domino’s restaurants around the world. A lot of them are franchises that pay the company royalties and fees.
The business still thinks that its annual global retail sales will grow by more than 7% (not counting foreign currency) and its annual operating income will grow by more than 8% (not counting foreign currency).
Between 2024 and 2028, Domino’s plans to open more than 175 new stores a year in the U.S.
But it thinks that opening 175 to 275 stores outside of the U.S. will fall short of its goal of more than 925 new stores by 2024. This is mostly because one of its master franchisees, Domino’s Pizza Enterprises (DPE DMP, -8.23%), is having trouble opening and closing stores.
As DPE works through this process, the company is working closely with them. They said they would give more information once they knew how it would affect their annual global net store growth numbers.
The company is putting off its guidance metric of more than 1,000 global net stores for now, until it knows how DPE’s openings and closings will affect international net store growth as a whole.
When Weiner talked to analysts on the phone, he said that the U.S. pipeline for new restaurants is still strong and growing. He also said that its two biggest growth markets, India and China, are on track to live up to their full potential. China is expected to have 1,000 stores by the end of the year and then add 300 to 350 stores a year starting in 2025.
In May, Jubliant, the master franchisee for Domino’s in India, raised the number of stores it could open to 5,500 in the next few years across the six global markets it operates in.
According to a FactSet transcript, Weiner said, “Jubilant’s goal shows the hungry-for-more mentality our global system is taking on.” It took Domino’s more than 60 years to open 5,500 stores in the United States.
The executive was talking about the Hungry for More five-year growth plan for the company.
Chief Financial Officer Sandeep Reddy said that the stores that closed in Japan and France were mostly small ones that didn’t sell much, so the overall effect on operating income isn’t that big.
Now, the company thinks that third-quarter same-store sales will be a little lower than second-quarter numbers because there is one less boost week. This will be partially made up for by more orders from Uber Eats, which the company became a partner of last year.
Same-store sales in the U.S. are expected to be higher than the company’s long-term 3% guidance. This is because of Uber and the benefits of a new loyalty program that has helped the carryout business in particular. He said that same-store sales would grow by at least 3% in both the third and fourth quarters.
The stock is up 1.2% so far this year, but it’s down 22% in the last month because of the “value wars” that have caused other fast-food chains to compete on price, which could hurt their profit margins.
So far this year, the S&P 500 SPX, -0.43% has gone up 17%.
