Key Takeaways:
Domino's Pizza reported Q2 revenue of $1.19 billion, edging past consensus estimates, as franchise supply-chain orders boosted results.
"I believe order growth is the most important driver of long-term success in our business," Russell Weiner, retiring chief executive officer of Domino's, said.
Revenue rose 4.3% from $1.14 billion a year earlier, topping the $1.18 billion average analyst estimate compiled by LSEG. Supply-chain revenue climbed 6.5% to $731.7 million on higher order volumes from franchise stores and a 2.2% increase in food-basket pricing. Earnings per share came in at $4.07, below the $4.17 consensus, as cost of sales rose 4.7% to $716.2 million.
Shares jumped about 7% in premarket trading to $343.50, recovering some of the 23% decline this year. The results show Domino's is winning on transaction counts but facing pressure on check sizes as value-conscious consumers trade down to discounted offerings.
U.S. same-store sales rose just 0.1% in the quarter ended June 14, the slowest pace in five quarters and below the 0.62% analysts had expected. International same-store sales posted a surprise decline of 0.1%, compared with estimates for a 0.5% increase. A year earlier, international same-store sales rose 2.4%.
"Positive transaction counts across both carryout and delivery are a bright spot, indicating the firm is still winning with consumers, albeit at lower check sizes," Ari Felhandler, an analyst at Morningstar, said.
The pizza chain operates a supply-chain business that manufactures and distributes ingredients, pizza dough and equipment to franchised and company-owned stores. Revenue from that segment rises when stores order more supplies or food prices increase. The company's model predicts supply-chain revenue growth of 9.1% for the fiscal second quarter, though actual growth came in at 6.5%.
Domino's had warned that macroeconomic pressure experienced in March formed the base assumption for its revised annual outlook. Weak consumer sentiment, ongoing inflation and higher gasoline prices have constrained disposable income and limited restaurant-order frequency, particularly among lower-income customers. National pizza competitors introduced offers comparable to Domino's established value promotions, while the broader quick-service restaurant industry continued to emphasize affordability.
The guidance raise signals management expects demand to hold steady through the second half of the fiscal year. Investors will watch the company's next earnings call for updates on margin trends and the impact of promotional competition on average ticket sizes.
This article is for informational purposes only and does not constitute investment advice.
