Domino’s Pizza Inc (NYSE:DPZ) announced its Q2 FY23 financial results with some hits and misses, amid a sales drop of 3.8% YoY, totaling $1.02 billion. This figure came up short against the expected analyst consensus of $1.07 billion.
The reported sales decline largely stemmed from a drop in supply chain revenues, as Domino’s scaled down its market basket pricing to stores and noted a decrease in order volumes.
A Closer Look at Retail Sales and Store Growth
Despite the dip in overall sales, Domino’s highlighted some silver linings in its Q2 results. Excluding the unfavorable impact of foreign currency fluctuations, global retail sales witnessed a 5.8% hike. With currency impact factored in, the sales still saw a decent growth rate of 4.3%.
Store sales demonstrated a mixed pattern. In the U.S., same-store sales registered a marginal increase of 0.1%. Internationally, once the foreign currency effect was removed, same-store sales rose by 3.6%.
Domino’s continued to expand its global footprint, with a net addition of 197 stores during the quarter. This included 27 new stores in the U.S. and 170 internationally.
Financial Health and Shareholder Returns
Domino’s Q2 financial health also showed positive signs. The company posted a healthy gross margin of 39.5%, up 320 basis points, while the operating margin grew 240 basis points to reach 19.1%.
Exceeding the analyst consensus of $3.05, the EPS for the quarter stood at $3.08.
The pizza giant declared it had $277 million in cash and equivalents as of June 18, 2023. The operating cash flow for the first half of the fiscal year was $242.3 million, generating a free cash flow of $204.3 million.
As a return to its shareholders, Domino’s board declared a quarterly dividend of $1.21 per share on July 20, 2023, for shareholders on record as of September 15, 2023. The payment is due on September 29, 2023.
During Q2, Domino’s bought back and retired 292,030 shares of common stock, costing the company $90.8 million. It still has an authorized share repurchase amount of $289.5 million left.
Market Reaction
Despite these highlights, the reported sales decline seemed to weigh on investor sentiment. As of the last check Monday, DPZ shares were trading 4.52% lower at $368.00 in the premarket.
