Analysis

Domino’s: Revenue and EPS Growth in Q3, but 2024 Outlook Was Down

Domino’s Pizza improved on multiple metrics compared to 2023, but management lowered annual expectations.

Restaurant giant Domino’s Pizza (DPZ 0.24%) reported positive results buy weakened guidance on Thursday for its third quarter. Its diluted earnings per share (EPS) were $4.19, slightly up from $4.18 last year. Revenue climbed 5.1% year over year to $1.08 billion. Domino’s demonstrated operational growth thanks to its technological innovation and a robust franchise model, but its guidance for the rest of the year was soft.

Metric Q3 2024 Q3 2023 Change (YOY)
Diluted EPS $4.19 $4.18 0.2%
Revenue $1.08 billion $1.03 billion 5.1%
Gross margin (U.S. company-owned) 16.8% 15.8% 1 pp
Global store count 21,002 20,930 0.3%

Source: Domino’s Pizza. YOY = Year over year. pp = percentage point.

Understanding Domino’s Business

Domino’s Pizza operates as a global leader in pizza delivery and carryout services. With most of its 21,002 stores owned by independent franchisees, the company capitalizes on a model that provides consistent revenue streams, including royalties and supply chain services. Technological innovation and a well-managed supply chain are key to its strategic success.

Domino’s recent efforts focus on leveraging technological advancements and expanding its franchise operations. Digital channels account for over 85% of sales in the U.S., with integrations like those with Uber Technologies(UBER 0.01%) Uber Eats.

Quarterly Highlights

In the third quarter of 2024, Domino’s continued its strong franchise model growth, adding a net 72 stores to bring its global total to 21,002. Despite challenges in France and Japan, the company remains focused on international expansion. Domestically, 3% growth in U.S. same-store sales highlighted the success of strategic product innovations, including the introduction of its New York Style Pizza.

In terms of financial performance, the company saw supply chain gross margin improvements to 10.6% from 10% last year, and its U.S. company-owned store gross margin improved by one percentage point to 16.8%. The mediocre EPS growth is attributed to pressure from higher effective tax rates and international operating challenges despite the operational income improvements.

Domino’s technology continued to play a significant role, with increased reliance on digital sales channels and enhanced delivery times supporting distribution efficiency. The integration of services with leading platforms like Uber Eats exemplifies ongoing efforts to stay competitive in a demanding market environment.

Domino’s maintained a stable dividend of $1.51 per share, with share repurchase activities totaling $190 million, reflecting solid cash management and a focus on shareholder returns.

While international same-store sales growth was just 0.8%, this overseas segment still holds potential for longer-term gains. Management underscores its commitment to strategic markets like China and India to drive further growth.

Looking Ahead

Management still projects growth in 2024, but it revised its estimate of global retail sales growth down to 6% (from 7% last quarter) and maintained its operating income growth estimate of 8%. The company plans to continue expanding its global footprint with a target of around 800 to 850 new store openings in 2024. Key markets remain in focus, particularly in China and India, where demand for pizza and delivery services is expected to grow.

The forward strategy centers on enhancing consumer experience through technological developments and operational excellence. Investors are advised to keep an eye on further integration with digital partners and growth initiatives in untapped international territories.

JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Domino’s Pizza and Uber Technologies. The Motley Fool has a disclosure policy.

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