Domino's delivering growth

by Monica Watrous
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Domino's pizza
For the second quarter, Domino’s had net income of $45,909,000.

ANN ARBOR, Mich. – A day after rival Pizza Hut’s parent company released another quarter of bleak results, Domino’s Pizza, Inc. posted a piping-hot performance for the period.

For the second quarter ended June 14, Domino’s had net income of $45,909,000, equal to 81 cents per share on the common stock, up 19 percent from $38,462,000, or 67 cents per share, in the prior-year period, driven by domestic and international same-store sales growth, global store count growth and higher supply chain volumes, which was partly offset by unfavorable foreign currency translation.

Revenues totaled $488,622,000, up 8.5 percent from $450,463,000 for the comparable quarter, driven by higher domestic same-store sales and store count growth, resulting in increased royalties from franchised stores and higher revenues at company-owned stores.

Also contributing to the increase in revenues were higher supply chain revenues from increased volumes and incremental sales of equipment in connection with the company’s store reimaging program. International same-store sales and store count grew over the prior-year period, but the revenue growth partially was offset by unfavorable foreign exchange rates.

Domestic same-store sales grew nearly 13 percent during the quarter over the year-ago period. Domino’s opened 186 stores during the quarter for a total of more than 11,900 stores in more than 80 international markets.

Conversely, Yum! Brands’ Pizza Hut business saw system sales fall 3 percent with flat same-store sales.
During a July 16 earnings call with financial analysts, J. Patrick Doyle, president and CEO of Domino’s, credited the company’s success to recent innovations in technology. 

J. Patrick Doyle, CEO of Domino's
Patrick Doyle, president and CEO of Domino’s.

“We can’t highlight our fundamental strengths and momentum without further discussing technology, an element that gives us a competitive advantage and contributes to our gaining market share,” Doyle said. “While the world of digital can be quite a competitive one, and the tech-to-table space we pioneered is ever-evolving, one thing is evident: We have not and we will not stop innovating.

“Domino’s continues to capture the attention of America with a truly creative approach to unique, innovative ordering platforms.”

With a recent drop in cheese costs, smaller pizza operators are able to offer lower price points and compete more effectively, contributing to category growth. However, Doyle noted larger players have been taking share from smaller pizza companies.

“Even though, certainly, one of the competitors has not been performing quite as well, I’m relatively sure, with comments that they’ve made, that they are driving change over there and they are going to get back on track,” Doyle said. “The longer-term story continues to be the same, which is, the larger players are taking share from the smaller players. And that’s from efficiencies, that’s from advertising and know-how, I think, within our system of how to run stores well.

“But clearly, the new part of it is digital and we are continuing to see shares shift from the smaller players to the larger players. And we have been a big beneficiary of that.”

Domino’s also announced a change in leadership. Jeffrey Lawrence, treasurer, has been tapped to succeed Michael Lawton as CFO in August. Lawton will retire after 16 years with the company.

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