Domino's Pizza (DPZ 0.72%) announced second-quarter earnings results this week that extended the pizza chain's impressive streak of growth in both its U.S. and international markets.
Here's a look at how the pizza delivery leader's headline results stacked up against the prior-year period:
|
Metric |
Q2 2018 |
Q2 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$779 million |
$629 million |
24% |
|
Net income |
$77 million |
$66 million |
18% |
|
EPS |
$1.78 |
$1.32 |
35% |
Data source: Domino's financial filings.
What happened this quarter?
Revenue rose 24% thanks to the combination of a quickly growing store base and robust sales gains at existing locations. Domino's profitability took a small step lower, though, as rising expenses outpaced savings from tax cuts to push margins down.
Image source: Getty Images.
Here are some of the key highlights from the quarter:
- Comparable-store sales growth was a robust 7% in the core U.S. segment. That marked a slight slowdown from the prior quarter's 8% rate but easily kept Domino's among the best-performing fast-food companies around. The international segment slowed a bit, too, falling to a 4% increase from 5%. Yet this division stayed within management's target of between 3% and 6% for the year.
- Domino's added 156 stores to its global base, split between 43 locations in the U.S. and 113 new restaurants in outside markets.
- Operating costs expanded faster than sales, which pushed operating margin down to 16.2% of sales from 18% a year ago.
- Tax payments dove, but the reduced operating margin combined with higher interest payments to push bottom-line profitability down to 9.9% of sales from 10.5% of sales.
- The chain spent $219 million repurchasing its stock, which led per-share earnings to rise by 35% compared to the 18% growth in net income.
- Domino's ended the quarter with $158 million of cash and $3.5 billion in debt.
What management had to say
CEO Ritch Allison, in his first quarter as the company's new leader, highlighted the chain's strong sales and store growth metrics." Global retail sales remain strong as we see our franchisees building new stores, growing same store sales and bringing customers back again and again," Allison said.
Management noted that customers reacted positively to tech initiatives like its recent "hotspots" program, which has created over 200,000 non-traditional delivery locations for places like beaches and parks that lack standard addresses. "I'm delighted to report that our franchisees and team members continued to deliver great results across the global Domino's system," Allison concluded.
Looking forward
Domino's doesn't issue specific sales guidance, but its recent results keep the company right on track to meet -- or exceed -- its long-term objectives. In fact, comps in the core U.S. market have been running ahead of management's annual target for the last six months, which suggests the chain has a good shot at improving on last year's 13% overall sales increase in 2018.
Profits are being pinched by increasing wages and higher commodity costs, particularly cheese. Domino's significant debt load, meanwhile, has kept interest payments at a hefty 4% of sales. Still, the chain has generated $166 million of net income through the first half of 2018, or 10.6% of sales, compared to $128 million, or 10.2% of sales in the prior-year period. As long as Domino's continues winning market share at home while expanding its store base internationally, shareholders can expect that profitability uptick to power robust earnings growth.
