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Domino's Earnings: The Key Takeaways

By Demitri Kalogeropoulos – Oct 20, 2021 at 2:18PM

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The pizza giant's latest operating results were mixed, but mostly positive.

Domino's Pizza (DPZ -1.01%) recently announced solid operating results for its fiscal third quarter. While sales growth slowed in some markets, earnings continued expanding and the chain continued handling higher order volumes.

In this video from "Beat & Raise" from Motley Fool Liverecorded on Oct. 14, Fool contributor Demitri Kalogeropoulos summarizes the big takeaways from the report.

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Demitri Kalogeropoulos: Domino's Pizza reported earnings this morning. The headline sales number was $999 million. This is their fiscal Q3, which runs through mid-September, and sales were a little bit lower than most Wall Street estimates. Management doesn't give a quarterly projection, but most Wall Street was expecting that number to be a little bit higher. Sales were up about 3% globally, and most investors were looking for that around 6% and 7%, so they were looking for about $1.03 billion, a modest miss on the top line.

Earnings per share came in at $3.24, which is around 30% higher year over year, and that was a little bit better than expected, too, so a mixed bag there. As you can see from this stock chart, this through most of today.

Domino's is still a little bit below the market, trailing the market over the last year. It is beating the S&P 500 so far in 2021. That's a little bit more of an arbitrary number, but shares are up and they're definitely beating the market over the wider time frame of five and 10 years. Some highlights that we're going to be getting into and diving into more over the next hour is, so sales growth slowed in the United States. That was a big headline.

Domino's had a slight decline in the U.S. market, which was the first time sales had dropped there around a decade, a little bit more than a decade. That's the bad news. The good news is it looks like that slowdown isn't necessarily tied to any market-share situation. It's more like a temporary staffing issue and things to do with COVID-19 and limited hours at different stores.

At the same time, the cost profile looks surprisingly good when you're thinking about restaurants and inflation and everything else. We're going to be looking at that a little bit more, but their margins did not fall this quarter even though food costs are rising and wages and things like that, we know are going up.

Then some of the things we're going to be looking out for, some of the challenges, is staffing. Management definitely talked about that in their conference call. There's a struggle to get enough fully staffed stores and get their army of drivers fully staffed. Inflation is running higher than they predicted a few months ago, but not out of control yet. That's a good sign, too.

Then there's still COVID-19 challenges having to do with pandemic restrictions. As a global business, obviously, they've got a big store footprint all over in Europe, Japan, India, and the U.S. There's a lot of countries that are still dealing with temporary capacity restrictions and things like that. That could still pinch results here in the last quarter of 2021.

But the overall outlook, I think we're going to see through this whole deep dive we're doing, it's pretty positive particularly on their new store growth, both in the U.S. and globally, which is going to be pushing global sales up higher over time.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Domino's Pizza. The Motley Fool has a disclosure policy.

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