Domino's Comps Not Tasty Enough

ANN ARBOR, Mich. (TheStreet) -- Domino's Pizza(DPZ) beat Wall Street's top- and bottom-line expectations for its second quarter, growing profits by 55.9% year-over-year.

Investors, however, hungered for more. Shares of Domino's, or slices of its proverbial pie, fell 2.2% in afternoon trading Tuesday. Shares of Buffalo Wild Wings(BWLD) and Panera Bread(PNRA), fellow food chains due to report quarterly financials Tuesday, were 1.6% lower and 1.4% higher, respectively.

Domino's said it grew comps, or sales at stores open at least one year, by 8.8% last quarter while analysts expected the key metric to come in around 10%, disappointing shareholders. The pizza delivery chain's shares were up nearly 60% year-to-date, Oppenheimer analyst Matthew J. DiFrisco told TheStreet, which also helps to explain Tuesday's stock price decline in light of the earnings beat. "There was some profit taking there," he said.

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Concerns about whether Domino's could maintain comps growth throughout 2010 were somewhat abated when, on a conference call with investors, Domino's executives reiterated sentiments that momentum was continuing into the third quarter with repeat customers. The company said its level of sustainability should be above its historical norms of low to mid-single-digit same-store-sales trends. DiFrisco expects Domino's to post mid- to high-single digit comps for 2010.

Buffalo Wild Wings recently cited a drag on its overall same-store sales figures for newer stores that saw big initial volumes after opening only to then see traffic fall at a rate that dragged overall company-wide comps figures. DiFrisco expects the Minneapolis-based company to say comps grew 1.5% in the recent quarter.

DiFrisco pointed out that Buffalo Wild's stock price grew in early June, the days leading up to the FIFA World Cup, on anticipated revenues generated by hungry soccer fans. But now investors want to see sequential improvements from the prior quarter, he said, since the wing and beer purveyor is still vulnerable to the headwinds of increased happy hour discounts in the second quarter.