Domino’s Pizza Stock increases in Q2 revenue and buyback program

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    Omnipresent pizza chain Dominos pizza (NYSE: DPZ) announced second quarter results Thursday, delivering a strong profit for investors as new menu items caught on with consumers. The company has also launched a new share buyback program to return cash to shareholders.

    At 11:30 a.m. on Thursday, Domino stock rose 11%.

    Delivering a strong quarter

    Total revenue for the second quarter was $ 1.03 billion, beating consensus estimate of $ 972 million in revenue.

    Sales in the same stores in the US rose 3.5% while international comparisons rose an impressive 13.9% (excluding the impact of currency fluctuations).

    Like many national restaurant chains, Domino’s saw a surge in demand during the pandemic as people ordered groceries from the safety of their homes.

    Domino’s had invested heavily in its technology infrastructure for many years and was thus well positioned for the shift to online ordering accelerated by the crisis. In addition, Domino’s has introduced new offers such as taco or cheeseburger specialty pizzas.

    Domino’s also expanded its retail presence, opening 238 new stores worldwide during the quarter. Including 35 new locations in the USA and a further 203 in international markets.

    Given the unprecedented conditions in 2020, the company believes it makes more sense to compare its performance to pre-pandemic levels.

    “Given our current operating environment, we are monitoring our two-year revenue trends that are linked to the results for fiscal 2019 prior to COVID-19,” commented CEO Ritch Allison in a press release. “I am pleased that in the second quarter our cumulative sales of the same branches over two years increased by 19.6% domestically and 15.2% internationally, which means significant and sustainable growth.”

    All of this resulted in adjusted earnings per share of $ 3.12, slightly exceeding the adjusted earnings of $ 2.88 per share that Wall Street analysts modeled for.

    Strengthening the capital structure

    During the quarter, Domino’s had launched a $ 1.85 billion recapitalization transaction to effectively refinance some of the debt while adding some cash to the balance sheet.

    The company used some of the money to participate in a $ 1 billion accelerated share buyback (ASR) program, in which an investment bank helps buy back shares in the open market over time. Domino’s closed the ASR and issued a special dividend of $ 13.50 per share.

    With that ASR in the rearview mirror, the company’s board of directors has now approved a new $ 1 billion share buyback program as the previous $ 1 billion buyback authorization has now been fully exhausted. The company advises that changes in its capital structure may affect the comparability of historical results.

    Domino’s ended the fiscal quarter with $ 292.1 million in unrestrained cash and $ 5.1 billion in total debt. The company’s cash flow – Domino generated $ 262.3 million in free cash flow in the quarter – is enough to service that debt, while the recapitalization will also help lower interest expense.

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    Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool recommends Domino’s Pizza. Millennial Money is part of The Motley Fool Network. Millennial Money has a disclosure policy.

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