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Higher Operations Costs During Pandemic Forces Domino's To Miss Quarterly Profit Estimates


10/09/2020


Higher Operations Costs During Pandemic Forces Domino's To Miss Quarterly Profit Estimates
Despite an increase in demand for its pizzas during the novel coronavirus pandemic crisis, the global pizza chain Dominos Pizza Inc reported a smaller than expected profit for the latest completed quarter because of higher costs related to the pandemic and bonuses to staff.
 
This bit of new brought down the shares of the company by 8 per cent on Thursday.
 
During the pandemic crisis, people were forced to stay back home and therefore demanded more of comfort food which helped to prop up the sale of the largest pizza chain of the world. However that growth was made against a price as the company spent about $11 million for hiring people, staff bonuses, payments for sick pay and sanitary measures during supplies and deliveries – including contact less deliveries. 
 
The company expects that the higher costs of operations will continue during the period of the pandemic, the company’s Chief Executive Officer Ritch Allison told analysts. He added that a slower rate of addition of new stores has also challenged the growth of the company in the international market.
 
The company said that there was a rise of 9.5 per cent in its general and administrative costs at $91.7 million during the third quarter.
 
"The extent of margin pressure was surprisingly high," Bernstein analyst Sara Senatore said. "While we believe this is the appropriate approach for long term worker heath and engagement, it did strip all of the upside."
 
During the reporting quarter, there was a 3.8 per cent growth in commodity costs for the company which included an all time record hike in the price of cheese – and important ingredient for pizzas.
 
During the third quarter which ended September 6, there was a 17.5 per cent growth in the sales at Domino's stores in the United States that had remained open for more than a year. That was more than what the Wall Street was estimating which was at 13.4 per cent. The growth in the company’s US business was aided by resumption of sports leagues and consumers placing more orders through delivery and takeout.
 
While adding wings, chicken tacos and cheeseburger pizzas to its menu, the pizza chain has also been intently focusing on tech innovations to prevent switching of its customers to its rival brands of McDonald's , Papa John's and Pizza Hut .
 
According to IBES data from Refinitiv, compared with market expectations of $2.79 a share, Domino's earned $2.49 per share on a per-share basis.
 
The company also reported a 15 per cent growth in net income at $99.1 million. The company also beat estimates for total revenues, estimated at about $953 million, and reported revenues of $967.7 million which marked a 17.9 per cent year on year growth.
 
(Source:www.usnews.com)