Domino's pan pizza resonating with customers
Domino's Pizza reported a nearly 22 percent jump in profits for the fourth quarter 2012 compared to the prior year, with a global sales increase of 9.4 percent. Domestic same-store sales were also up 4.7 percent.
"Everything went our way in the fourth quarter and it capped off a very successful 2012. We maintained our store growth and sales momentum, we grew market share in the U.S. and in international markets, we increased the EPS by 20 percent and we reached 10,000 stores worldwide, putting us in a league with only a select few restaurant peers," said CEO Patrick Doyle.
Domestically, Domino's was given a boost by its pan pizza launch in September, which positively impacted same-store sales and drove an increase in order counts.
"Early indications are that online customers were some of our best pan pizza customers engaging strongly with this new product. We now have a product competing nicely in this category and we're gaining a meaningful foothold with lots of opportunity for future growth," Doyle said.
The pan pizza, he added, contributed strong enough order counts in the second half of the year to offset a slow first half for order counts.
"The overall effect was great. We definitely drove more customers into the franchise. I will tell you that it was a bit ahead of our expectations," Doyle said.
International growth was another highlight from Thursday's earnings call. During Q4, Domino's opened 32 net stores domestically, while the international division grew by 183 stores. For the full year, the company had a record international growth of 492 net new stores.
Global same-store sales were up 5.2 percent in the quarter and for the year, marking Domino's 76th consecutive quarter of positive same-store sales.
"The international franchisees did this in the year when the macroeconomic picture wasn't all rosy. But again, we drove good steady results from a wide mix of countries. In large countries, small ones, new markets or established markets, our geographic diversity and long runway for growth has helped keep our international business vigorous," Doyle said.
Digital sales and marketing spend
During 2012, Domino's surpassed the $2 billion mark in digital sales. Technology initiatives, including those that focus on the customer experience, will be a big area of investment for the company this year, Doyle said.
The company's franchisees also recently voted to increase national ad spend to 6 percent, from 5.5 percent. The additional budget will go toward national advertising and will include digital in addition to mass media advertising. Doyle said the company has experienced a better return on investment with its national messaging versus local marketing activities, which are mostly print-based.
Finally, Doyle said high gas prices haven't affected the delivery side of Domino's or led to big changes in consumer behavior. However, gas price spikes are concerning because of their affect on food supply costs.
"We saw that in 2007 when gas prices spiked up a lot, it started to flow through into commodities. And that's honestly where our biggest concern is when you look at gas prices. Consumer behavior, reimbursements, we just haven't seen that much in the past that's material. The bigger issue is if it starts to flow through commodities," he said.
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Alicia Kelso / Alicia has been a professional journalist for 15 years. Her work with FastCasual.com, QSRweb.com and PizzaMarketplace.com has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, Consumerist.com and Franchise Asia magazine.