Domino’s Earnings Rise, So Why is The Stock Falling Flat? (-11% And Counting)

Today, Domino’s Pizza is giving me flashbacks of my one friend in junior high who got an A- on a test and still got grounded. Sorry Kyle. 

The world’s largest pizza company just reported a second-quarter revenue of $1.1 billion, a solid 7.1% increase from last year. But despite these mouth-watering numbers, their stock is fumbling 11% today and has dropped 11% over the past month. Why? Because apparently 2024 is the year where logic takes a backseat.

Earnings for the quarter ending in June skyrocketed by 30.8% to $4.03 per share, leaving analysts who expected $3.68 putting their foot in their mouths. The secret ingredient? One-time gains from their investment in DPC Dash, their main business in China.

CEO Russell Weiner (no relation to Anthony Weiner) took the pizza stand and proudly declared, “For the second straight quarter, we drove U.S. comp performance in the healthiest way possible, through profitable order count growth.” Translation: More folks are craving Domino’s. It’s nice to know I’m not alone.

Globally, Domino’s has overtaken the pizza industry with over 20,000 restaurants, mostly run by franchisees who fork over royalties and fees. In Q2, the “dough slinging” domino’s engine racked up $4.43 billion in sales, a 7.2% increase from last year.

Domino’s isn’t just sitting back; it’s actively expanding. Their five-year plan, called Hungry for MORE (quite fitting name right?), aims to open 1,100 new stores by 2028 and boost annual sales by 7%. 

In the second quarter alone, they opened 228 new stores, mostly internationally, and closed 53. “Our year-to-date performance shows our Hungry for MORE strategy is off to a fantastic start,” Weiner said, as he tried to pump up his company’s share price.

But aiming for the stars can be tricky—sometimes you just end up hitting a bird. Domino’s had high hopes of opening over 925 net new international stores this year but now expects to fall short by 175 to 275 stores due to challenges with a major franchisee.

Despite the positive numbers, investors are feeling a tummy ache about a potential dip in restaurant demand due to rising prices. This summer, fast-food giants like McDonald’s, Burger King, and Wendy’s have entered a value war, cutting prices to attract more business—a move that could squeeze (already low) profit margins tighter than a dad bod wearing skinny jeans. 

To stay ahead of the game, Domino’s listed its food on UberEats last year, joining the delivery party. Then, in September, they revamped their loyalty program, rolling out sweet deals and point-redemption offers to win back those customers who don’t order as often. I’m sure you’ve seen the commercials while watching your favorite NFL team get eliminated from the playoffs.

(Source: Fox Business)

“Our strategy is resonating with customers and our system, which gives me great confidence that we can drive significant long-term value creation for our shareholders,” Weiner said, as he watches his share price continue to go lower and lower.

In the first half of 2024, Domino’s bought back $25 million worth of stock and announced a quarterly dividend of $1.51 per share, set to be paid on September 30. Before today, the stock was up 14% on the year, right now, it’s hanging on to the green by a thread.

Stock.News has positions in Mcdonalds.