• Domino's credits store ops and marketing for record '01 sales

ANN ARBOR, Mich. -- Dave Brandon, chairman and CEO of Domino's Pizza says maintaining its 2001 record sales pace through 2002 will come from a mix of continued improvements in store operations and marketing, as well as closing underperforming stores.

Last year the company posted systemwide sales of $3.78 billion, an increase of 6.8 percent, and a 7.9 percent jump in revenues to $1.25 billion. Net income rose to $36.8 million, up from $25.2 million in 2000.

Brandon spoke during a March 5 conference call, saying the closure of stores with weekly sales less than $5,000 helped streamline overall operations, and that such trimming will continue in 2002.

"As we continue to hit very hard on store operations, any operators that can't meet the standard are under pressure to move aside to allow those stores to be taken over by people who can meet the standard," said Brandon. "Typically our new-store openings are double that ($5,000) amount." Brandon added that as the company closes stores, it will look to reopen them at a later date with stronger franchisees.

Ken Calwell, executive vice president, build the brand, said delivery is the pizza category's strongest growth segment, and that as "the leaders in the delivery market," the company is well positioned against its top competitors.

"We hit over a 20 percent delivery share in the fourth quarter of 2001, which represents nearly a seven-point gap versus Pizza Hut, and a 10-point gap versus Papa John's," said Calwell, who joined the company last August. "This is the largest gap we've had over those two competitors prior to 1998."

For 2002, Calwell said Domino's will improve its national advertising messages by better linking them to local marketing efforts. The company's brand message "is stronger than it has been in the past," he said, adding, "we're more focused on our category and more focused on the food experience."

Bright as the news from Ann Arbor may be, CFO Harry Silverman said the Domino's still expects a tough road ahead for 2002, as the company deals with increases in food and labor costs.

"All in all we expect increasing margin pressure at all stores," said Silverman. Cost of sales for 2001, he added, were up .6 percent last year, due mostly to high cheese costs.

Brandon echoed Silverman's concerns, saying "store growth will continue to be a challenge ... in this market environment."

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