Domino's Pizza (DPZ 1.37%) is slated to report its results for its second quarter of fiscal 2022 before the market open on Thursday, July 21. An analyst conference call is scheduled for the same day at 10 a.m. ET.
Investors will probably be feeling somewhat cautious about the report. Last quarter, the company fell short of Wall Street's consensus earnings expectation. The report's most concerning metric, however, was the 3.6% decline in same-store sales in the company's core U.S. market.
Management attributed the lighter-than-expected results to several headwinds. These included staffing shortages, which constrained revenue growth, and sharply rising input cost and wage inflation, which took a bite out of the bottom line. Moreover, management said that it expected some of these headwinds to persist further into the year.
The upcoming earnings report will be the first one released under Russell Weiner's tenure as CEO. On May 1, Weiner, the company's former chief operating officer and president of Domino's U.S., succeeded Ritch Allison, who retired.
Image source: Getty Images.
Domino's Pizza's key numbers
Here are Wall Street's estimates for the quarter and the company's year-ago results to use as benchmarks.
| Metric | Fiscal Q2 2021 Result | Wall Street's Fiscal Q2 2022 Consensus Estimate | Wall Street's Projected Change (Decline) |
|---|---|---|---|
| Revenue | $1.03 billion | $1.05 billion | 2% |
| Adjusted earnings per share | $3.12 | $2.88 | (8%) |
Data sources: Domino's Pizza and Yahoo! Finance.
Unlike many companies in the restaurant industry and the broader consumer discretionary sector, Domino's got a brisk tailwind from the earlier stages of the pandemic. That was thanks to the company's business being largely focused on delivery and carryout.
With the company facing tough comparables and many consumers returning to dining within restaurants, it was to be expected that Domino's year-over-year sales growth would slow. The slowdown over the last two quarters, however, wasn't just due to these factors, but also to staffing shortages stemming from a tight labor market and the nationwide surge in COVID-19 omicron variant infections in late 2021 to early 2022.
For context, last quarter (which ended on March 27), Domino's total sales rose 2.8% year over year to $1.01 billion. Growth was primarily due to higher supply chain revenue stemming from the company's increases in the prices of the food baskets that it sells to stores.
U.S. same-store sales declined 3.6%, while international same-store sales (excluding foreign currency impact) increased 1.2%. Revenue got a boost from 213 net new store openings over the last year, with the U.S. store count increasing by 37 to 6,560 and the international number rising by 176 to 12,288.
Last quarter's earnings per share declined 17% year over year to $2.50, which missed the $3.05 Wall Street expectation. Cash from operations was $78.8 million, down 48% from the year-ago period.
Inflationary pressures on food inputs
On Domino's first-quarter earnings call in April, chief financial officer Sandeep Reddy said the company now expects an annual increase of 10% to 12% in its food-basket costs for its U.S. stores.
This is an upward revision to the 8% to 10% projection that management had provided earlier in the year.
Keep a long-term focus
Domino's is facing macroeconomic factors that are beyond its control, including high inflation and a tight labor market. Eventually, these issues will improve, so long-term investors shouldn't give too much importance to the company's short-term performance.
