Domino's Pizza (DPZ -1.68%) reported strong results for the fiscal second quarter of 2021 (which ended in late June) on Thursday, July 22. Despite facing a very challenging U.S. comparable, the pizza retailing giant's revenue surged 12% year over year to $1.03 billion, and its adjusted earnings per share rose 4.3% to $3.12.
Both the top and bottom lines sped by the Wall Street consensus estimates, which were $969 million (or growth of about 6%) and $2.86, respectively, as outlined in my earnings preview.
Investors were delighted and propelled Domino's stock up 14.6% on the day of the earnings release to an all-time closing high. In 2021 to date (July 26), shares of the consumer discretionary company have returned 40%, outpacing the S&P 500's 18.7% return over this period.
Earnings releases tell only part of the story. Here are three key things management shared on the fiscal Q2 earnings call that you should know.
Image source: Getty Images.
1. U.S. same-store sales grew despite the broad reopening of the economy
Domino's turned in a great quarter across the board, with global retail sales jumping 22% year over year, or 17% in constant currency. U.S. total retail sales and same-store retail sales grew 7.4% and 3.5%, respectively. Internationally, total and same-store retail sales surged 30% and 14%, respectively, in constant currency.
The U.S. results were particularly noteworthy because of the high-bar comparable in the second quarter of last year. In that quarter, consumers flocked to restaurant delivery and takeout options while the pandemic was out of control. The international results were fantastic, but less surprising since many of Domino's international stores were closed in the year-ago period.
CEO Ritch Allison had this to say on the topic:
Turning to [U.S.] same-store sales, perhaps the thing I'm most pleased about when I look at the 3.5% U.S. comp is the fact that we were able to hold [the number of] orders flat while overlapping the big gains from Q2 2020. I'm also pleased that our [average ticket-price] growth was driven by a very healthy balance of more items per order and modest menu price and delivery fee increases. [...]
We achieved positive comps in both our [U.S.] delivery and carryout businesses, with delivery driven by ticket and carryout driven by a balance of order count and ticket growth.
2. Car-side delivery is aiming to capture drive-through-oriented consumers
From Allison's remarks:
We continue to build awareness of Domino's car-side delivery. [...] This is a great technology-enabled way to serve our customers and will remain an important part of our strategy as we continue to evolve the carryout experience. [It enables us] not only to enhance the loyalty of our current carryout customers, but also to reach a new different and largely untapped drive-thru-oriented customer going forward.
Domino's car-side delivery program, which involves prepaid online orders, launched in stores across the United States in July 2020. The company had plans for this program on its agenda before the pandemic, but once the crisis hit, wisely rolled it out more quickly than planned.
Allison said the company views this program as a "fantastic way to compete against the drive-through" chains. Some of the company's stores have pickup windows, but he said, "we're never going to get to 100% pickup windows in Domino's Pizza stores."
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3. Working on technologies to run stores with less labor
As with many companies, especially in the restaurant industry, Domino's and its franchisees, collectively, have been finding it challenging to find enough qualified employees.
Allison said on the call that franchisees have the power to raise their hourly pay to attract more job applicants and some are doing so. In addition, he said corporate is also working on this issue from the technology end:
We are absolutely working on technologies and operating procedures to help us run our stores more efficiently, and with less labor. [W]e're trying to take a lot of things off [drivers'] plates that cause them to do anything other than being in a car delivering a pizza or on a bike delivering a pizza. [...] We've rolled out our GPS software to our stores and it's in the hands of our drivers on their smartphones. [...] We're working on other things as well around how we schedule and staff the stores using machine-learning. [Machine-learning is a type of artificial intelligence, or AI.]
In short, Domino's Pizza's better-than-expected fiscal Q2 results underscore the fact that this company is far from just a "pandemic play."
