Shares of Domino's Pizza (DPZ +0.46%) fell over 15% this week, according to data from S&P Global Market Intelligence. The largest pizza chain in the world posted strong comparable sales growth and earnings for the quarter, but projected weaker store openings and a sales slowdown in the latter half of 2024. Investors decided to sell the stock down 13.5% after its earnings came out Thursday morning.
As of market close on Thursday, July 18, Domino's Pizza stock is down 16.8% this week. Here's why.
Good comparable sales growth, but a projected slowdown
Domino's kicked off earnings season with its second-quarter earnings report on Thursday. The company earned a profit of $4.03 per share, beating analyst expectations of $3.68. Sales also came in strong, with global retail sales up 7.2% and U.S. same-store sales growth of 4.8% year over year. A lot of restaurants are struggling with unit volumes right now, so a 4.8% growth rate is good to see from the company.
So why was the stock down? Guidance for the rest of 2024 and long-term unit growth. Domino's said that comparable sales growth would fall to 3% in the U.S. for the rest of 2024, which likely disappointed investors. More importantly, management now believes it will fall 175 to 275 stores short of its 2024 goal of opening up 925 stores internationally. This was due to one of its big franchisees (Domino's is a franchise business and doesn't actually operate restaurants) closing stores in Europe and Japan. International growth is important for Domino's, so it will be key to track whether it can get back to its growth goal in the years to come.
NASDAQ: DPZ
Key Data Points
Is Domino's stock a buy?
Domino's might grow slower than investors previously expected, but the business is still doing fine. Traffic is growing in the United States and internationally, with consistently positive comparable sales growth. With just over 20,000 stores around the globe, the company still has plenty of room to expand its unit count. For reference, McDonald's has twice as many locations around the world.
With this recent drawdown, Domino's now trades at a price-to-earnings ratio (P/E) of 27. While not dirt cheap, this is a reasonable valuation for a company that puts up consistent growth. If you want to own Domino's stock, now may be a good time to scoop up some shares.
