Yahoo Finance Domino's (NYSE:DPZ) Q2 Earnings Results: Revenue In Line With Expectations
Fast-food pizza chain Domino’s (NYSE:DPZ) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 7.1% year on year to $1.10 billion. It made a GAAP profit of $4.03 per share, improving from its profit of $3.08 per share in the same quarter last year.
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Domino's (DPZ) Q2 CY2024 Highlights:
Revenue: $1.10 billion vs analyst estimates of $1.10 billion (small miss)
EPS: $4.03 vs analyst estimates of $3.68 (9.6% beat)
Suspends long-term guidance of 1,100 net store growth per year
Gross Margin (GAAP): 28.4%, in line with the same quarter last year
Free Cash Flow of $127.2 million, up 23.1% from the previous quarter
Locations: 20,930 at quarter end, up from 20,205 in the same quarter last year
Same-Store Sales rose 4.8% year on year (1.8% in the same quarter last year)
Market Capitalization: $16.48 billion
"Our year-to-date performance demonstrates that our Hungry for MORE strategy is off to a great start, having an immediate impact on sales and profits," said Russell Weiner, Domino's Chief Executive Officer.
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
Domino's is one of the larger restaurant chains in the industry and benefits from a strong brand, giving it customer mindshare and influence over purchasing decisions.
As you can see below, the company's annualized revenue growth rate of 5.6% over the last five years was sluggish , but to its credit, it opened new restaurants and grew sales at existing, established dining locations.
This quarter, Domino's revenue grew 7.1% year on year to $1.10 billion, missing Wall Street's expectations. Looking ahead, Wall Street expects sales to grow 7.8% over the next 12 months, an acceleration from this quarter.
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Same-Store Sales
Domino's demand within its existing restaurants has been relatively stable over the last eight quarters but fallen behind the broader sector. On average, the company's same-store sales have grown by 2.1% year on year. With positive same-store sales growth amid an increasing number of restaurants, Domino's is reaching more diners and growing sales.
In the latest quarter, Domino's same-store sales rose 4.8% year on year. This growth was an acceleration from the 1.8% year-on-year increase it posted 12 months ago, which is always an encouraging sign.
Key Takeaways from Domino's Q2 Results
It was encouraging to see Domino's slightly top analysts' EPS expectations this quarter. On the other hand, its revenue and gross margin missed analysts' expectations. The company suspended its long-term guidance of 1,100 annual net store openings, which is a bad sign. It could mean that the market is more saturated than previously thought. It could also mean that the product is no longer resonating with customers, especially in areas previously thought to be good new markets for the company. Either way, lower store openings will certainly mean lower revenue growth over time. Overall, this quarter could have been better. The stock traded down 4.9% to $450 immediately following the results.
Domino's may have had a tough quarter, but does that actually create an opportunity to invest right now? 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.
