Domino’s Pizza posts $84M profit in 3Q; shares fall
Ann Arbor – Domino's Pizza shares fell Tuesday following mixed results on its quarterly earnings for Ritch Allison's first few months in leadership.
For the third quarter of 2018, the Ann Arbor-based pizza chain reported a profit of $84.1 million, up 49 percent from the same quarter in 2017. The quarter benefited from higher global royalties and supply-chain volumes from increased sales as well as tax cuts and the sale of 12 company-owned stores to franchisees.
"My first three months on the job have only reinforced my point of view on what it takes to succeed in this business," Allison, the company's CEO, said on a call with analysts. "Many of you have told us we make this look easy at times, but the retail results, franchisee energy and the momentum within our system don't come easily. They take hard work each and every day."
Domino's stock price is up 47 percent over the past year, though its shares dropped 5 percent to $259.41 Tuesday afternoon after the company's revenue and domestic same-store sales missed Wall Street's expectations.
Domino's reported $1.95 diluted earnings per share for the third quarter. That beat Wall Street's expectations of $1.75 per share, according to Zacks Investment Research, but revenue fell short of the expected 23 percent spike to $790 million. Domino's sales totaled $786 million.
Domestic same-store sales, according to Consensus Metrix, which analyzes market estimates, missed the 6.5-percent growth analysts had expected. They were up 6.3 percent, the 30th consecutive quarter of growth.
Following controversial comments made by now-former Papa John's Pizza chairman John Schnatter, analysts expected Yum! Brands' Pizza Hut to benefit the most. Allison said Papa John's has a small share of the market and its effect "isn't necessarily as heavy as one might assume."
"We're focused on our own growth strategy," Allison said, "and not the short-term ups and downs of any competitor."
International same-store sales, on the other hand, beat the expected 3.2 percent, growing 3.3 percent from last year for a 99th consecutive quarter of growth. Domino's Chief Financial Officer Jeff Lawrence said the company saw growth in all regions except its European business, though Allison said he is optimistic about opportunities in Russia.
Domino's added 232 net new stores in the third quarter consisting of 59 U.S. stores and 173 international locations. The company had two stores close in the U.S. and 19 internationally. In 2018 so far, the company has added 498 net new stores.
As a result of the growth, the company opened its first supply chain center in more than a decade in Edison, New Jersey. In July, Domino's said it also was accelerating plans to open two more centers for operation in early- to mid-2020.
In October, the company also renewed its lease with Domino's Farms Office Park at an annual cost of $7.9 million, according to a government filing. The renewal includes construction of a new 33,000-square-foot building called the Annex with a 130-space parking lot in the Ann Arbor office park. Domino's Farms is expected to pay for the $7.8 million building for use by April 30.
Allison, formerly head of Domino's international business, took over for Patrick Doyle in July. Since becoming CEO in 2010, Doyle had propelled Domino's to the No. 1 pizza chain in global sales, surpassing Pizza Hut in 2017.
"We are a work-in-progress brand," Allison said. "And we will never rest in our quest to achieve a dominant No. 1 position in every market where we compete."