Domino's Pizza Inc.
) reported first quarter 2012 adjusted earnings of 47 cents per
share, lagging the Zacks Consensus Estimate of 49 cents but
surpassing the year-ago adjusted earnings of 42 cents. On a
reported basis, earnings per share (EPS) were 35 cents compared
with 43 cents recorded in the year-ago quarter.
While the quarterly earnings per share benefited from lower
diluted share count mainly due to share buyback activity in 2011,
currency translation and higher interest expense had a negative
impact on EPS.
Inside the Headline Numbers
Total revenue dropped 1.2% year over year in the reported
quarter to $384.6 million hurt by lower company-owned store and
domestic supply chain revenues partly due to lower order counts at
the store level.
During the quarter, the company's overall domestic same-store
sales moved up 2.0% with company-owned units and franchises rising
1.6% and 2.1%, respectively. Same-store sales grew 4.7% in the
international market. Global retail sales were up 6.1% or 7.2%
excluding a foreign currency impact.
The company's operating margin expanded 110 basis points (bps)
to 29.8% in the reported quarter. The average cheese block price in
the first quarter decreased to $1.52 per pound from year-earlier
quarter's $1.69. The check in one of the main food ingredients'
price helped contain the overall increase in commodity basket
during the quarter.
During the first quarter, Domino's opened 13 franchise units and
closed 21 franchised stores and one company-owned store, bringing
the total domestic store count to 4,898.
Internationally, the company opened 86 stores and closed 9. The
company currently operates 4,912 international stores.
At quarter-end, Domino's Pizza had cash and cash equivalents of
$214.7 million with long-term debt, less current portion of
Store level economics of Domino's Pizza are strong and keep on
fueling growth. Moreover, the company's growth model does not
involve substantial investments as it concentrates on the master
franchise structure. Domino's Pizza remains optimistic about its
international operations both in terms of sales and store
On the food cost front, Domino's will likely witness some
moderation in the quarters ahead with market basket for 2012 to
increase 1% to 2% year over year. However, the company will likely
experience a higher normalized tax rate going forward.
Domino's which competes with the likes of
Texas Roadhouse Inc.
) holds a Zacks #3 Rank, implying a short-term Hold rating. We also
reiterate our long-term Neutral recommendation on the stock.
DOMINOS PIZZA (DPZ): Free Stock Analysis Report
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