Domino’s Pizza: Q1-2020 Results and Business Update

Ann Arbor / MG. (dp) Domino’s Pizza Inc., the largest pizza company in the world based on global retail sales, announced results for the first quarter. Global retail sales increased 4.4 percent in the first quarter, or 5.9 percent excluding foreign currency impact. U.S. same store sales grew 1.6 percent during the quarter versus the year-ago period, continuing the positive sales momentum in the Company’s U.S. stores business. The international business also posted positive results, with same store sales growth of 1.5 percent during the quarter. The first quarter marked the 105th consecutive quarter of international same store sales growth and the 36th consecutive quarter of U.S. same store sales growth.

During the quarter, the Company opened 178 gross new stores and 69 net new stores, comprised of 30 net new U.S. stores and 39 net new international stores. The Company’s net store growth includes the closure of its South Africa market, unrelated to the Covid-19 pandemic, comprising 71 stores in total.

First quarter diluted EPS was USD 3.07, up 39.5 percent over the prior year quarter. On April 21, 2020, the Company’s Board of Directors declared a USD 0.78 per share quarterly dividend for shareholders of record as of June 15, 2020 to be paid on June 30, 2020.

«In a time of unprecedented change in our industry, I am pleased to report that Domino’s is in a very strong financial position, both at the brand and franchisee levels,» said Ritch Allison, Domino’s Chief Executive Officer. «We can’t predict the full impact of Covid-19 on the broader economy and we don’t know how consumer behavior and restaurant purchasing patterns may evolve coming out of this crisis. What I do know is that our franchisees and teams in the U.S. and across the globe will remain focused on safely serving our customers and our communities in this time of need. I have great confidence in our people and our ability to manage through this crisis, and I remain optimistic about the long-term potential of the Domino’s brand.»

First Quarter Highlights (Unaudited)

(USD in millions, except per share data)		Q1/2020				Q1/2019
Net income		USD	121.6			USD	92.7
Weighted average diluted shares			39,633,404				42,202,429
Diluted EPS		USD	3.07			USD	2.20

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• Revenues increased USD 37.1 million, or 4.4 percent, in the first quarter of 2020. This increase was primarily due to an increase in global store counts during the trailing four quarters as well as U.S. and international same store sales growth, resulting in higher supply chain and U.S. and international franchise revenues. The increases in revenues were partially offset by lower U.S. Company-owned store revenues resulting from the previously disclosed sale of 59 U.S. Company-owned stores to certain of the Company’s existing U.S. franchisees during the second quarter of 2019.
• Net Income increased USD 29.0 million, or 31.2 percent, in the first quarter of 2020. This increase was primarily driven by a lower effective tax rate as compared to the prior year quarter as a result of higher tax benefits from equity-based compensation. Higher royalty revenues from U.S. and international franchised stores and higher supply chain volumes also benefited net income. The increase in net income was partially offset by higher net interest expense as a result of a higher average debt balance.
• Diluted EPS was USD 3.07 for the first quarter versus USD 2.20 in the prior year quarter. This represents a USD 0.87, or 39.5 percent, increase over the prior year quarter. The increase in diluted EPS was driven by higher net income, as well as lower diluted share count, primarily resulting from the Company’s share repurchases during the trailing four quarters.

The table below outlines certain statistical measures utilized by the Company to analyze its performance (unaudited). Refer to the Comments on Regulation G section on page four for additional details.

Same store sales growth

		Q1/2020				Q1-2019
(versus prior year period)
U.S. Company-owned stores			+ 3.9	%			+ 2.1	%
U.S. franchise stores			+ 1.5	%			+ 4.1	%
U.S. stores			+ 1.6	%			+ 3.9	%
International stores (excluding foreign currency impact)			+ 1.5	%			+ 1.8	%
Global retail sales growth: (versus prior year period)
U.S. stores			+ 4.9	%			+7.9	%
International stores			+ 3.9	%			+1.5	%
Total			+ 4.4	%			+4.6	%
Global retail sales growth: (versus prior year period, excluding foreign currency impact)
U.S. stores			+ 4.9	%			+7.9	%
International stores			+ 6.8	%			+9.1	%
Total			+ 5.9	%			+8.5	%

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		U.S. Company-owned Stores				U.S. Franchise Stores				Total U.S. Stores				International Stores				Total
Store counts:
Store count at December 29, 2019			342				5,784				6,126				10,894				17,020
Openings			4				31				35				143				178
Closings (1) (2)			(1)				(4)				(5)				(104)				(109)
Store count at March 22, 2020			345				5,811				6,156				10,933				17,089
First quarter 2020 net store growth			3				27				30				39				69
Trailing four quarters net store growth (3)			12				241				253				722				975

(1) Temporary store closures due to Covid-19 are not treated as store closures and affected stores are included in the March 22, 2020 store count.
(2) Unrelated to Covid-19, the South Africa market, comprising 71 stores in total, closed in the first quarter.
(3) Trailing four quarters net store growth does not include the effect of transfers. In the second quarter of 2019, the Company sold a total of 59 U.S. Company-owned stores to certain of its existing U.S. franchisees.

Company Withdraws Two- to Three-Year Outlook

Due to the current uncertainty surrounding the global economy and the Company’s business operations considering Covid-19, the Company is withdrawing its two-to three-year outlook for global retail sales growth, U.S. same store sales growth, international same store sales growth and global net unit growth.