Revenues of Domino’s Pizza (DPZ) rose sharply in the third quarter but fell short of expectations, triggering a stock sell-off during the pre-market trading. Supported by strong margin growth, the company’s earnings increased and exceeded Wall Street estimates.
The fast-food chain reported a net profit of $84.1 million or $1.95 per share for the September quarter, which is nearly 50% higher compared to $56.4 million or $1.27 per share recorded last year. The bottom line surpassed analysts’ forecast.
Domino’s Pizza Inc. Q3 2018 earnings infographic
Revenues jumped 22% annually to $785.97 million, aided by an uptick in orders and higher store count. However, analysts had forecast a faster top-line growth. Domestic same-store sales moved up 6.4%, missing expectations by a penny. International comparable store sales grew 6.3%, broadly in line with expectations. During the quarter, global retail sales registered an 8% increase.
Supported by strong margin growth, the company’s earnings rose sharply and exceeded Wall Street estimates
“In particular, our U.S. business once again executed at extremely high levels in the third quarter. Our global business, driven by strong retail sales growth and franchisee economics that outperformed the industry, continued its strong momentum,” said CEO Ritch Allison.
In the third quarter, Domino’s added 232 new units to its store network globally, raising the total store count to 15,354. The management repurchased 397,490 shares for about $109.1 million during the quarter.
Of late, the American fast food sector has witnessed an increase in competition, affecting margins of the leading players including Domino’s and McDonald’s. There is speculation that the pizza giant could benefit from the recent slump at rival Papa John’s, triggered by the controversy that resulted in the exit of its founder John Schnatter.
Domino’s stock gained 36% since January this year and reached a peak in August. The stock closed the previous trading session lower and dropped sharply after the earnings report Tuesday.