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Domino's Pizza turns in negative comps, profit and revenue for 2006
February 22, 2007
ANN ARBOR, Mich. — Despite increasing its global sales 2 percent and passing the $5 billion mark for sales,Domino's Pizzaposted negative returns in three key categories for 2006.
According to a news release, domestic same-store sales dropped 4.1 percent for all of 2006 (made up of a 2.2 percent decline at company-owned stores and a 4.4 percent decline at franchised stores). The fourth quarter was particularly difficult as domestic comps slid 4.1 percent.
For the full year, international comps rose 4 percent, and 3.9 percent in the fourth quarter.
Full-year revenue was $1.44 billion, a drop of 4.9 percent compared to 2005 revenue of $1.51 billion. Q4 revenue was $435.3 million, a decline of 4.8 percent compared to $457.4 million in the same period in 2005.
Management attributed some of the drop to a 6.9 percent decrease in domestic distribution revenues for the full year. The year's lower cheese prices constituted about half of the full-year decrease.
International revenue decreased 4.8 percent for the full year and 14.7 percent in Q4. Last year's sale of company-owned operations in France and the Netherlands to a large franchise group played a role in the decline.
Full-year net income was $106.2 million, down 1.9 percent from $108.3 million in 2005. Net income in Q4 was $31 million, down 22.8 percent from $40.2 million in 2005.
Domino's attributed much of the comparable decline to a gain recognized in Q4 2005 on the sale of an equity investment in the company's master franchisee in Mexico, as well as increased interest expenses in 2006.
David Brandon, the chain's chairman and chief executive officer, called 2006 a difficult and challenging year for Domino's domestic business, adding that some of its problems were self-imposed.
"Our national marketing and promotions underperformed during the first half of the year," Brandon said. "Following those disappointments, too many of our operators went into 'cost-cutting mode' and our store operations suffered."
Those cuts, he said, weakened store-level performance and left operators ill equipped to execute effectively in the second half of the year.
"This was disappointing, but we have already taken corrective actions," Brandon added. "We are committed to learning from 2006 and re-establishing our track record of producing annual domestic same store sales increases of 1 percent to 3 percent."
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