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Domino's Pizza Q4 Results Aren't as Spicy as Wall Street Hoped

By Rhian Hunt - Feb 25, 2021 at 10:39AM

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The company may be seeing demand drop as the pandemic ebbs, one analyst says.

Domino's Pizza (DPZ -0.40%) posted robust fourth-quarter fiscal 2020 results this morning, but not quite as robust as Wall Street analyst consensus had hoped, causing the pizza purveyor's share price to sag close to 7% so far in morning trading. Adjusted earnings per share (EPS) delivered a negative 8.7% surprise according to Zacks Equity Research, while revenue came up approximately 1.5% short of Wall Street's average forecast.

While the fast casual pizza chain missed predictions on both key metrics, its performance still demonstrated strong growth year over year. Global retail sails during Q4 climbed 12% year over year, while comparable sales, or comps, in the United States registered 11.5% growth. Full-year figures were similar at 10.4% and 11.5% respectively. EPS of $3.85 jumped 23.4% compared to Q4 2019.

A hand taking a slice from a pepperoni pizza resting on wooden planks.

Image source: Getty Images.

Domino's also opened a net total of 388 stores in the fourth quarter. Since this represents 62% of the 624 net openings the company registered in all of 2020, the metric shows new Domino's restaurant openings are accelerating. The company's worldwide retail sales of $5.5 billion in Q4 and $16.1 billion in fiscal 2020 overall have enabled it to pay $1,200 bonuses to 11,500 front-line workers and announce a $1 billion share repurchase program yesterday.

Still, the company's outlook gives some analysts pause. Its two- to three-year guidance expects 6% to 10% growth in net sales and net unit growth of 6% to 8%. A research note from analyst Andrew Charles at Cowen warns demand for pizza may be slackening after the huge spike during COVID-19, noting Domino's guidance is about 1% lower than its pre-pandemic figures, from which Cowen sees "U.S. comps of 1%-5% and International comps of Flat to 4%," still positive growth but a strong deceleration from current sales.

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