Financial Performance

Domino’s Misses on Earnings, Launches Buyback

The pizza-delivery giant has been repurchasing shares as sales growth has slowed amid competition from third-party apps.
Matthew HellerOctober 8, 2019
Domino’s Misses on Earnings, Launches Buyback

Domino’s Pizza announced another share buyback on Tuesday after reporting lower-than-expected quarterly earnings and same-store sales.

CFO Jeff Lawrence said on an earnings call that the pizza delivery giant would repurchase $1 billion shares, bringing total buybacks over the past three years to nearly $3 billion.

“On average over the last 12 months we have not only generated more than $1 million per day in free cash flow but when you add our share repurchases and dividends together we have also returned more than $1 million per day to our shareholders,” Lawrence said.

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The announcement of the buyback came after Domino’s disappointed investors with another quarter of weak sales growth. Comparable sales at U.S. stores grew by 2.4% in the third quarter — the smallest gain since the second quarter of fiscal 2012.

Analysts expecting growth of 2.8% in the key retail sales metric.

The company earned $2.05 per share as net sales rose 4.4% to $820.8 million, missing estimates of earnings of $2.07 per share on revenue of $823.9 million.

“It was a good quarter for Domino’s as we continue to lean on our fundamental strength against a unique competitive environment,” CEO Ritch Allison said in a news release, citing strong unit growth and positive same-store sales.

Domino’s shares initially fell in morning trading Tuesday but rallied after the earnings call, rising 4.2% to $252.44

As CNBC reports, Domino’s has been facing growing competition from third-party delivery apps. Competitors such as Pizza Hut and Papa John’s have partnered with outside delivery networks but Domino’s is “betting that [the third-party] business model, which involves luring customers with free delivery and deep discounts, is not sustainable,” CNBC said.

Allison told investors on the conference call that there is a “significant shakeout coming to the industry.”

Domino’s also on Tuesday also announced a new outlook for the next two to three years, replacing its prior outlook for the next three to five years. It now expects sales growth in a range of 7% to 10% from a previous range of 8% to 12%.

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