Rising competition, pandemic costs take slice out of Domino’s profit

FILE PHOTO: A Domino's Pizza restaurant is seen in Los Angeles

(Reuters) – Domino’s Pizza Inc on Thursday posted a slowdown in quarterly same-store sales growth, as stiff competition from rival fast-food chains, an uptick in indoor dining trends and pandemic-related costs ate into its business.

Shares of the company slid 8% as its U.S. same-store sales growth slowed to 11.2% from 17.5% in the previous quarter, and also missed market estimates.

Easing COVID-19 restrictions have led to a slight rebound in business for dine-in restaurants, while competitors doubling down on digital operations to keep up with surging online orders has also inflicted pressure on pizza chains.

Rival Papa John’s also missed estimates for fourth-quarter profit and comparable sales on Thursday, sending its shares tumbling 14%.

“Domino’s is all delivery and in the near-term, they could see a shift as vaccines continue to roll out and people start to go out to restaurants more,” Tigress Financial Partners Chief Investment Officer Ivan Feinseth told Reuters.

Fast-food giants have also incurred high costs to sanitize their stores regularly while doling out bonuses for their workers. Domino’s estimated pandemic-related costs, including sick pay and cleaning equipment, came in at $7 million during the quarter.

General and administrative costs rose to $138.4 million from $119.7 million a year earlier.

Chief Executive Richard Allison told analysts Domino’s this year would aim to boost takeaways, which have been pressured by the health crisis, and invest more in supply chain and technology.

“As we look ahead to 2021, we aren’t sure exactly what the new normal will look like or when we’ll get there,” Allison said.

Total revenue rose about 18% to $1.36 billion, falling slightly short of Wall Street estimates of $1.39 billion, according to Refinitiv IBES data.

Net income rose about 18% to $151.9 million, or $3.85 per share. Analysts were expecting a profit of $3.89 per share.

The results miss overshadowed Domino’s new $1 billion share buyback program and a 20.5% increase in quarterly dividend.

(Reporting by Praveen Paramasivam in Bengaluru; Editing by Ramakrishnan M.)

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