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Domino's (DPZ) Q1 Earnings Top, Down Y/Y on Low Net Income

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Domino's Pizza, Inc. (DPZ - Free Report) reported better-than-expected results for fiscal first-quarter 2021. Earnings and revenues topped their respective Zacks Consensus Estimate. Despite top-line growth, quarterly earnings declined on a year-over-year basis due to lower net income.

The company reported strong U.S. same-store sales. The fiscal first quarter also marked the 40th straight quarter of positive U.S. comparable sales and 109th consecutive quarter of positive international comps.

On Apr 27, its board of directors announced 94 cents per share quarterly dividend on its outstanding common stock for shareholders of record as of Jun 15, 2021, to be paid on Jun 30.

Earnings & Revenues Discussion

The company reported adjusted earnings per share of $3.00 per share, which topped the Zacks Consensus Estimate of $2.94 by 2%. However, the reported figure decreased 2.3% on a year-over-year basis. Its net income was negatively impacted by a significantly higher provision for income taxes, resulting from lower tax benefits from equity-based compensation due to fewer stock option exercises in the fiscal first quarter than the comparable prior-year period.

Dominos Pizza Inc Price, Consensus and EPS Surprise

Dominos Pizza Inc Price, Consensus and EPS Surprise

Dominos Pizza Inc price-consensus-eps-surprise-chart | Dominos Pizza Inc Quote

Revenues of $983.7 million marginally topped the consensus mark of $978.6 million and rose 12.7% on a year-over-year basis. The upside was driven by U.S. and international same-store sales growth along with an increase in global store count in fiscal 2020, in turn resulting in higher supply chain, U.S. stores and international franchise revenues.

The company opened 624 stores in fiscal 2020. In first-quarter fiscal 2021, it opened 175 stores, comprising 36 net new U.S. stores and 139 net new international stores.

Comps

Global retail sales (including total sales of franchise and company-owned units) increased 16.7% on a year-over-year basis for the fiscal first quarter. The upside can be primarily attributed to growth in sales at domestic stores (up 15.3%) and international stores (up 18%).  Excluding foreign currency impact, global retail sales increased 14% from the prior-year quarter.

For the fiscal first quarter, comps at Domino’s domestic stores (including company-owned and franchise stores) increased 13.4% from the year-ago quarter. Moreover, it was significantly higher than the prior-year quarter’s increase of 1.6%.

At domestic company-owned stores, Domino’s comps rose 6.3% year over year, higher than 3.9% growth in the year-ago period. Moreover, domestic franchise stores comps increased 13.9% year over year compared with 1.5% growth in the prior-year quarter.

Comps at international stores, excluding foreign currency translation, were up 11.8% year over year. This was higher than 1.5% improvement in the year-ago quarter.

Margins

Domino’s operating margin expanded 60 basis points (bps) year over year to 39.6% for the reported quarter. Net income margin for the quarter came in at 12%, down 190 bps from the prior-year level.

Balance Sheet

As of Mar 28, 2021, cash and cash equivalents totaled $267.7 million, down from $168.8 million on Jan 3, 2021. It had $157.5 million of available borrowing capacity under its 2019 variable funding notes, net of letters of credit issued of $42.5 million, at first-quarter fiscal 2021-end.

Long-term debt at fiscal first quarter-end was $4.12 billion, almost in line with the fiscal 2020 level. Inventory amounted to $63.8 million compared with $66.7 million at fiscal 2020-end.

Net cash provided by operations totaled $152.9 million at fiscal first quarter-end. For the quarter under review, Domino’s incurred capital expenditures of $16.6 million.

For the fiscal first quarter, the company repurchased and retired 65,870 shares of its common stock under the share repurchase program for approximately $25 million. As of Mar 28, 2021, it had a total remaining authorized amount for share repurchases of $1 billion.

Zacks Rank & Peer Releases

Domino’s currently carries a Zacks Rank #3 (Hold).

YUM! Brands, Inc. (YUM - Free Report) reported strong first-quarter 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Both the metrics also improved year over year.

Brinker International, Inc. (EAT - Free Report) reported third-quarter fiscal 2021 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. The bottom line beat the consensus estimate for the sixth straight quarter. Moreover, the metrics declined year over year.

The Cheesecake Factory Incorporated (CAKE - Free Report) reported solid first-quarter fiscal 2021 results, with earnings and revenues beating the Zacks Consensus Estimate as well as increasing on a year-over-year basis.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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