Short-term pandemic-related costs ate into Domino’s profit line, CEO says

Domino’s Pizza posted a second-straight quarter of double-digit growth, driven by improved delivery demand amid the coronavirus pandemic in the third quarter.

While the pizza chain exceeded expectations on the top line, expenses related to health safety cut into the company’s profits as it missed expectations on the bottom line.

CEO Ritch Allison, who appeared on “Mad Money” after reporting results from the period that ended Sept. 6, said the added costs will be a reality in the near term.

“The reality is it’s just more expensive to operate, you know, in the coronavirus world that we’re living in now,” he told CNBC host Jim Cramer.

Domino’s recorded $968 million in revenue and earned $99 million in the three-month period. Those numbers were up 17.9% and 15%, respectively, from the same quarter a year ago. Same-store sales improved by 17.5%.

The company beat Wall Street’s expectations in sales, but missed earnings per share estimates by 30 cents with $2.49.

The stock, which has surged more than 36% this year, dropped 7% on the trading day closing at $401.01.

The pandemic costs that Domino’s endured included spending on protective equipment and cleaning supplies to mitigate the spread of Covid-19 in its restaurants. The company has also added more wages and sick pay to employee packages, Allison said.

Cheese, which is a key ingredient on pizza pies, also contributed to more expenses as prices rose over the summer, he added.

“Combine that with a cheese price increase over the course of the summer and we saw some cost pressures in the short term,” he said. “But over the long term, we’re continuing to focus on driving that top line. Some of these Covid-related costs will certainly abate over the long term.”

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