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Feb 27, 2024, 12:07:08 PM
Domino’s Pizza, Inc. Delivers Tasty Financial Performance in Fiscal 2023
Domino’s Pizza, Inc. announced its financial results for the fourth quarter and fiscal year 2023, showcasing continued growth across various key performance indicators despite some challenges. Here’s a summary of the financial outcomes and projections for the future.
Financial Performance in Fiscal 2023
- Global Retail Sales Growth: Excluding the impact of foreign currency fluctuations, Domino’s saw a 4.9% increase in global retail sales during the fourth quarter and a 5.4% increase for the fiscal year 2023.
- U.S. Same Store Sales Growth: In the U.S., same store sales grew by 2.8% in the fourth quarter and 1.6% for the fiscal year.
- International Same Store Sales Growth: Internationally, excluding foreign currency impact, same store sales saw a slight increase of 0.1% in the fourth quarter and 1.7% growth for the fiscal year.
- Global Net Store Growth: The company achieved a net store growth of 394 in the fourth quarter and 711 for the fiscal year. Excluding the closure of the Russian market, the global net stores grew by 870 for fiscal 2023.
- Income from Operations: Income from operations was up by 3.4% for the fourth quarter and 6.7% for the fiscal year. Excluding a specific pre-tax refranchising gain from 2022, the growth was even higher at 13.0% for the fourth quarter and 9.7% for the fiscal year.
- Quarterly Dividend Increase: The Board of Directors approved a 25% increase in the quarterly dividend to $1.51 per share and also approved an additional $1.0 billion share repurchase program.
Detailed Financial Metrics for Fiscal 2023
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Revenues: Revenue increased by $10.7 million or 0.8% in the fourth quarter of 2023 compared to the fourth quarter of 2022. This increase was primarily due to higher global franchise royalties and fees resulting from global retail sales growth (excluding foreign currency impact) and higher supply chain revenues. However, there was a partial offset by a decrease in U.S. franchise advertising revenues.
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Diluted Earnings Per Share (EPS): Diluted EPS for the fourth quarter of 2023 was $4.48 compared to $4.43 in the fourth quarter of 2022, marking a 1.1% increase. This increase was attributed to improved operating results, an unrealized gain associated with the remeasurement of the Company’s investment in DPC Dash Ltd, lower net interest expense, and a lower weighted average diluted share count, partially offset by the pre-tax refranchising gain on the 2022 Store Sale and an unfavorable tax rate impact.
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Net Income: Net income slightly decreased by $1.0 million, or 0.6%, in the fourth quarter of 2023 compared to the same period in 2022, primarily due to an increase in the provision for income taxes, which was driven by a higher effective tax rate of 23.5% in the fourth quarter of 2023 versus 16.6% in the fourth quarter of 2022.
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Cash Flow and Capital Expenditures: Net cash provided by operating activities was $590.9 million in 2023, compared to $475.3 million in 2022. The company spent $105.4 million on capital expenditures during 2023, up from $87.2 million during 2022, resulting in free cash flow of $485.5 million in 2023 compared to $388.1 million in 2022. The increase in free cash flow was primarily due to positive changes in operating assets and liabilities and higher net income, excluding non-cash operating activities, despite higher investments in capital expenditures.
Quarterly Dividend and Share Repurchases
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Quarterly Dividend: Following the fiscal year 2023, the company’s Board of Directors approved a 25% increase in its per-share quarterly dividend, declaring a dividend of $1.51 per share for shareholders of record as of March 15, 2024, to be paid on March 29, 2024.
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Share Repurchases: During the fourth quarter of 2023, Domino’s repurchased and retired 167,572 shares of common stock for a total of $58.2 million. Following the end of the fourth quarter, the Board authorized an additional share repurchase program up to $1.0 billion, in addition to the previously remaining authorization of $141.3 million, totaling $1.14 billion for future share repurchases.
Key Highlights and Strategies
- The CEO highlighted the success of the "Hungry for MORE" strategy, aimed at driving more sales, stores, and profits, indicating strong momentum and confidence in the brand's growth and shareholder value creation.
- Operational efficiencies and strategic initiatives, like the relaunch of the Domino’s Rewards program, played a significant role, although there were increases in labor costs and insurance costs.
- The supply chain gross margin improved due to lower food costs, attributed to procurement productivity and a decrease in market basket pricing to stores.
Future Outlook (2024 – 2028)
Domino’s provided long-term guidance during its Investor Day, setting ambitious targets for the coming years, including:
- Over 7% annual global retail sales growth.
- More than 1,100 annual global net store growth.
- Over 8% annual income from operations growth.