Article

Domino's international division surpasses domestic footprint

Company's Q1 promotional focus was on side items, driving tickets and store profits.

May 1, 2012 by Alicia Kelso — Editor, QSRWeb.com

For the first time in Domino's Pizza's history, the company's international footprint is larger than its domestic store count.

Domino's today announced results for its first quarter ended March 25, which included a net store growth of 77 units internationally, and a same-store sales growth of 4.7 percent versus a year-ago period. This marks the company's 73rd consecutive quarter of same-store sales growth from its international division.

"This was another big quarter marked by robust international unit and same-store sales growth. This is a testament to our strong international franchisees and international team, and this achievement helped turn in the highest first quarter store growth for Domino's in a decade and the highest for the international division ever," said CEO J. Patrick Doyle.

As of March 25, 2012, there are 4,898 total franchised and company-owned Domino's in the U.S., and 4,912 total international stores.

Other first quarter highlights included:

• Net income dropped to $20.7 million from $27.1 million in 2011, or 23.5 percent, attributed mostly to expenses incurred from the company's recapitalization efforts and lower supply chain margins;
• Revenues were down 1.2 percent for Q1, due primarily to lower company-owned store revenues from their sale to multiple franchisees in 2011.
• Global retail sales were up 6.1 percent in the first quarter.
• Same-store sales growth was up 1.6 percent for domestic company-owned stores; 2.1 percent for domestic franchise stores; and 4.7 percent for international stores.

Promotional focus on sides

Doyle discussed how the promotional focus on side items – including Cheesy Bread and Parmesan Bites – led to improved franchise and company-owned store profitability.

"Sides are profitable for stores to sell and they're good for tickets. We felt the promotion would balance out our marketing calendar and drive up store profits and sales in 2012," he said. "Profitable franchisees make for a healthier system."

Doyle added that some promotions are designed specifically to drive margins and others to drive traffic. Domino's first quarter focus on sides to drive margins will be balanced out in the second quarter, with a focus on pizza to drive traffic behind the Artisan line and the Early Week Carry Out special.

The new Parmesan Bites, launched in February, sold "very, very well" during the quarter, according to Doyle and were effective in driving profits, a small step toward building the company's domestic footprint.

"That is the big positive new story coming out of the quarter – store margins moved nicely forward. We're very focused on that. Over the medium term, getting store level profits to where they want to be will be a driver for us on store growth," he said.

Technology initiatives

There were plenty of digital gains during the first quarter as well. In India and the United Kingdom, for example, online sales jumped to 44 percent.

During Q1, Domino's U.S. launched its Android app. With this and its iPhone app launched last year, 7 percent of total U.S. sales now come from mobile devices, including from these two apps and the mobile website.

And, more than 20 percent of all digital sales now come from the mobile site and the two apps.

Online sales in the U.S. are now "north of 30 percent." This is about 5 percent more than last year at this time.

"A recent TV commercial highlights another innovation – using our iPad Pizza Hero game to hire great new team members. We're probably not going to get a flood of new hires this way, but it does demonstrate that we're doing innovative new thinking often at the core of our business," Doyle said.

Domino's named Kevin Vasconi as its executive vice president and chief information officer, effective March 19, and Doyle promised more technology news to be delivered soon under his leadership.

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