Domino’s Pizza (DPZ) is set to report its fiscal fourth-quarter earnings Thursday before market open.
Some areas of focus for Wall Street include the impact of U.S. price increases last fall and their effect on same-store sales, potential benefits from consumer trade-down, the impact of inflation on the cost of goods, and domestic unit growth, among others.
Here’s what Wall Street expects from Domino’s Q4 results, per Bloomberg consensus estimates:
- Revenue: $1.43 billion expected, up 6.5% from a year ago
- Adjusted earnings per share: $3.97, down 6.9 from a year ago
UBS Analyst Dennis Geiger said the Michigan-based pizza chain is among “the most topical & debated stocks” in its coverage “given concerns around the sales & earnings growth trajectory, but with opportunity for sizable upside” with an emphasis on momentum toward “historical growth levels.”
Potential pressures on U.S. sales come from staffing challenges and competition, Geiger said. Strength this quarter could include pickup orders and delivery, promotions, trade-down benefits based on value and menu innovation, he said.
Earlier this month, Domino’s Pizza introduced loaded potato tots with three flavor options, including Philly cheese steak, cheddar bacon, and melty 3-cheese. Geiger said the firm expects “modest contribution” from the recent addition, plus “1-2 new menu items per year still the playbook.” UBS has a Buy rating and $410 price target.
Many analysts are looking to see how price increases may have impacted consumers.
Last October, executives announced plans to raise prices around 7% in the fourth quarter, along with plans to increase the price of its Mix & Match deal to $6.99, up from $5.99.
Peter Saleh of BTIG said in a note to investors, “We estimate that Domino’s has the highest level of menu pricing in more than a decade (over 7%) right now, with potentially more coming, and lapping the lost operating days should add 150-200 bps of comparable sales. The higher pricing and moderating commodity inflation should translate into restaurant margin improvement this year, reversing the over 800 bps gap to its historical average that ranks as the worst among our quick-service coverage.”
He later said that inflation that hit the overall cost of goods for the company “peaked.” In particular, deflation of cheese, down 10% from the average price last year. If this trend continues, it could help lower the company’s overall commodity basket this year, he said. BTIG has a $460 price target and Buy rating.
Like Geiger, Jon Tower of CITI, who has a Buy rating and price target of $429.00, is keeping an eye on delivery. Tower said third-party delivery remains top of mind, calling it an “opportunity that DPZ management is missing” as competition for delivered pizza increases.
“The growth of third-party delivery fundamentally altered the foodservice delivery space — embrace it or lose share, with other national pizza players moving onto third-party delivery and third-party delivery’s embrace of loyalty/subscription services further training consumers towards these platforms,” Tower said in a note to investors.
This comes as Domino’s Pizza keeps an eye on its biggest competitors, such as Pizza Hut (YUM) and Papa John’s (PZZA), both of which have similar price points and new innovations.
