Domino's recipe revamp pays off in Q4 traffic

March 1, 2010
Domino's Pizza Inc. took a risk when it revamped its pizza recipes late last year. As the company releases its fourth quarter and year-end earnings for the period ended Jan. 3, that bet has paid off.
During the fourth quarter, the company's domestic same store sales grew 1.4 percent as a result of increased store traffic. International same store sales were up 3.9 percent in the fourth quarter, marking the 64th consecutive quarter of same store sales growth for this division.
For the year, domestic comps were down 0.9 percent at company-owned stores and up 0.6 percent at franchise-owned stores. International comps were up 4.3 percent for the year.
David A. Brandon, Domino's chairman and CEO, credited the new recipes.
"The bold steps we have been taking to re-ignite our domestic system helped us gain significant traction last year," he said in a news release. "We succeeded in our primary goal of growing traffic all four quarters of 2009. Traffic growth was the most significant in the fourth quarter; and this positive momentum has continued thus far in 2010, as sales and traffic have increased significantly since the launch of our new core pizza."
The company's international division continues to be a strong performer as well. "The international business is now nearly half of our global retail sales and will continue to be a powerful growth engine for our business going forward," he said.
Revenues for the quarter were up 8.1 percent to $462.9 million compared to $428.2 million in the same period last year, due primarily to the positive impact of the 53rd week in 2009 and, to a lesser extent, higher same-store sales in both domestic and international stores and store count growth in international markets. Partially offsetting these increases were lower commodity costs, which negatively impacted supply chain revenues.
For the year, revenues were down 1.5 percent at $1.4 billion compared to $1.4 billion last year.
Net income for the quarter was up 114 percent at $23.6 million vs. $11 million in the same period last year, driven primarily by gains on debt repurchases and related lower interest expense, improved sales and operating margins and international store growth. Additionally, the 53rd week positively impacted net income in the fourth quarter by approximately $2.9 million.
For the year, net income was up 47.5 percent at $79.7 million vs. $54 million for the prior year.
Debt repurchases
During the fourth quarter, the company repurchased and retired $49.2 million in principal amount of its fixed rate senior notes and approximately $189.2 million during fiscal 2009. These activities resulted in pre-tax gains of approximately $7.9 million in the fourth quarter and $56.3 million for fiscal 2009.
Subsequent to the fourth quarter of 2009, the company repurchased and retired an additional $50.0 million in principal amount of its fixed rate senior notes, which resulted in a pre-tax gain of approximately $5.2 million that will be recorded in the first quarter of 2010. This $50.0 million principal amount of fixed rate senior notes is classified as a current liability in the company's consolidated balance sheet as of Jan. 3, 2010.
Conference call
A replay of the Domino's Pizza Inc. conference call to review its fiscal 2009 financial results will be available for replay for 30 days by dialing (800) 642-1687 (U.S./Canada) or (706) 645-9291 (international), Conference ID 45887215. The webcast also will be archived for 30 days on

Topics: Business Strategy and Profitability , Domino's Pizza , Dough , Operations Management , Pizza Sauce

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