News

Domino's same-store sales, profits up again

October 17, 2011

Domino's Pizza Inc. today announced positive results for the third quarter ended Sept. 11. The company enjoyed a domestic same-store sales increase of 3 percent versus the year-ago period, performing well against a strong third quarter in 2010, when sales were up 11.7 percent.

The international division posted another positive quarter with same-store sales growth of 8.1 percent in the third quarter, marking the 71st consecutive quarter of positive same-store sales growth for the division.

Third quarter diluted EPS, as-reported was 36 cents. Third quarter diluted EPS, as-adjusted was 35 cents, up 30 percent over the as-adjusted diluted EPS in Q3 2010.

"We're proud of that performance," said J. Patrick Doyle, Domino's president and CEO. "In the face of these uncertain economic times, Domino's has continued to prove its resiliency. This quarter is yet another example of how increasing loyalty from our customers is driving terrific results around the world."

Third Quarter highlights include:

• Net income $22.1 million, compared to $16.6 million in Q3 2010;
• Diluted earnings per share, as adjusted, were 35 cents, compared to 27 cents in Q3 2010;
• Revenues were up 8.3 percent for Q3 versus the prior-year period, due primarily to higher commodity prices impacting the company's supply chain revenues, higher same-store sales in both domestic and international stores, store count growth in international markets and the positive impact of changes in foreign currency exchange rates;
• Net Income was up 33.1 percent for Q3 versus the prior-year period, primarily driven by domestic and international same store sales growth, international store growth, lower interest expense and a lower effective tax rate in 2011;
• Global Retail Sales were up 13.3 percent in the third quarter, or up 9.1 percent when excluding the impact of foreign currency.

Internationally, Doyle said the UK and Ireland same-store sales were strong, with a 4.1 percent boost and 15 new stores in the quarter. The master franchisee in India recently announced its first store opening in Sri Lanka, and Australia had its largest same-store sales growth, 13.2 percent, in more than a decade.

"The message is clear, Domino's International is truly a best-in-class business. The results, quarter after quarter for all 71 of them, speak for themselves," Doyle said. "At the risk of sounding like a broken record, not only is our business doing well around the world, our franchise business model continues to provide a solid structure on which to build. We have sustained improvement due to higher customer satisfaction, extended and improved overall menu, we continue to provide value to cash-strapped consumers and our operators are giving them great service. It's a simple formula, but it's not easy to execute. I'm proud to lead a team and partner with great franchisees."

Share repurchases

During Q3 2011, the company repurchased and retired 3,163,060 shares of its common stock under its open market share repurchase program for a total cost of approximately $81.9 million, or an average price of $25.87 per share. Year to date, the company has repurchased and retired 5,268,550 shares of its common stock for a total cost of approximately $129.2 million, or an average price of $24.50 per share.

Subsequent to the third quarter, the company repurchased and retired 91,993 shares of its common stock for a total cost of approximately $2.5 million, or an average price of $26.84 per share. Including the subsequent repurchases, the company has approximately $115.7 million remaining under its open market share repurchase program, which the company's Board of Directors reset at $200 million during the third quarter.

Q&A highlights

Among the highlights from the Q&A portion of today's investor call was an overview on the strength of the ecommerce component globally. Markets in Asia, in particular, have seen digital orders accelerate to nearly 50 percent of the business. Australia and the UK are also strong online ordering markets. The platforms recently launched in India and Latin America, which are consequently lower in comparison.

The carry-out business has progressed steadily within the past decade. Doyle said in the year 2000, it probably made up between 15 to 20 percent of the total business model, and now it's about one-third of the business.

The new Artisan Pizzas have been seamlessly integrated into franchises, Doyle said, as they provide little change operationally. It is the company's intention to have the line be a permanent addition to the menu. Even at its current $7.99 introductory price, it has thus far provided a boon to the bottom line, he said.

Finally, the international growth strategy will continue.

"If you look at the big picture of the long-term international growth opportunities, there is more runway there than I'm going to have to worry about in my career or even in my lifetime," Doyle said. "We're in 70-plus markets today and there may be 10 or 20 more over time, but for the most part, most of the markets that are going to have real scale are markets we're already competing in."

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