Domino’s Q2 profit beats view; stock falls on sales miss

Domino’s Pizza (DPZ) has remained a standout among its peers in the fast-food industry, taking advantage of the changing customer preferences and e-commerce initiatives. The company reported better-than-expected earnings for the second quarter as its fast-growing store network generated strong sales.

Net income jumped to $77.4 million or $1.78 per share from $65.74 million or $1.32 per share in the second quarter of 2017. Excluding one-time items, earnings were $1.84 per share, up 39% compared to last year and above Wall Street estimates.

The bottomline particularly benefitted from an increase in royalty revenues and supply chain volumes. Meanwhile, higher net interest expenses and general and administrative expenses limited the growth rate.

Revenues rose 24% annually to $779.4 million during the quarter helped by a 12.6% rise in retail sales. Contributing significantly to the uptick in sales, domestic and international same-store sales grew 6.9% and 4% respectively. However, the topline came in below expectations.

Earnings benefited from strong royalty revenues and supply chain volumes, which was partially offset by higher expenses. 

“Global retail sales remain strong as we see our franchisees building new stores, growing same store sales and bringing customers back again and again. Our second quarter was highlighted by yet another innovation in food delivery with the launch of Domino’s HotSpots, of which there are now more than 200,000 across the United States,” said Domino’s CEO Ritch Allison.

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Continuing its expansion spree, the pizza chain opened 113 new stores in overseas locations during the three-month period, and added 43 outlets in the domestic market.

Domino’s rival and restaurant operator Papa John’s (PZZA) is slated to announce second-quarter results on July 31, after reporting disappointing results for the first quarter that triggered a stock sell-off. McDonald’s (MCD) will be releasing results for its most recent quarter on July 26.

Domino’s shares gained modestly since January and hit a record high in mid-June. The stock opened higher on Thursday, but lost nearly 5% in the early trading hours after the earnings release.