Domino's Pizza: Mixed Q3 Results and Revised 2024 Growth Expectations

Domino's Pizza Inc. (DPZ) reported mixed third-quarter results, with earnings beating analyst expectations but revenue falling short. The company also scaled back its growth expectations for 2024, citing economic headwinds. This article delves into the key aspects of Domino's Q3 performance and its revised outlook.

Domino's Q3 earnings per share (EPS) of $4.19 surpassed the consensus estimate of $3.68, driven by higher supply chain revenues, U.S. franchise advertising, and U.S. franchise royalties and fees. However, revenue growth of 5.1% year-over-year (YoY) to $1.08 billion missed the analyst consensus estimate of $1.10 billion.

The company's global retail sales increased 5.1% YoY, excluding the impact of foreign currency. Same-store sales in the U.S. grew 3.0%, while international same-store sales (excluding foreign currency impact) increased 0.8%. Gross margin expanded to 39.2% from 38.8% a year ago, while operating margin rose to 18.6% from 18.3%.

Domino's attributed its revenue growth to higher order volumes and an increase in the company's food basket pricing to stores. However, economic headwinds, such as a challenging consumer environment, led to a slight downward revision in the company's sales guidance for 2024. Domino's now expects around 6% annual global retail sales growth and 8% income from operations growth for 2024, compared to its previous forecast of 7%+ annual global retail sales growth and 8%+ annual income from operations growth.

The company's focus on its "Hungry for MORE" strategy has been instrumental in driving positive outcomes despite economic headwinds. Domino's global net store growth of 72 stores in the quarter highlights the company's expansion efforts. However, the challenging macroeconomic environment has led to a reduction in the company's global net store growth projection for 2024 to 800-850 stores, down from the previous estimate of 825-925 stores.

In conclusion, Domino's Pizza reported mixed Q3 results, with earnings beating expectations but revenue falling short. The company's revised growth expectations for 2024 reflect the impact of economic headwinds on its business trends. Despite these challenges, Domino's remains committed to its "Hungry for MORE" strategy and continues to expand its global footprint. Investors should closely monitor the company's performance and its ability to navigate the current economic landscape.