Domino's Pizza Inc.
) posted solid fourth-quarter 2013 results. Domino's
fourth-quarter 2013 adjusted earnings of 78 cents per share beat
the Zacks Consensus Estimate of 76 cents by 2.6% and the year-ago
quarter's earnings of 64 cents by 21.9%. The upside in the
earnings was driven by higher top line, margin expansion and
lower share count.
Quarterly revenues increased 5% year over year to $566.5
million and also surpassed the Zacks Consensus Estimate of $563
million by 0.6%. Increased domestic store revenues (franchised
and company-owned units included), strong international sales and
higher supply-chain revenues aided Domino's top line during the
Inside the Headline Numbers
During the fourth quarter, Domino's Pizza's domestic stores
(company-owned and franchise stores included) comps were up 3.7%
with company-owned and franchise comps rising 1.2% and 4%,
respectively. However, the company's domestic comps were lower
than the third quarter comps of 5.4% and the year-ago level of
Comps took a higher jump in the international stores recording
7% growth (foreign currency translation excluded). The
international comps were also better than the third-quarter comps
of 5% and the year-ago level of 5.2%.
Excluding the impact of foreign currency translation, global
retail sales (total sales of franchise and company-owned units
included) were up 9.9% year over year. However, including the
foreign currency translation impact, sales were up 7.2%.
Increased order count and higher comps drove the global retail
sales during the quarter.
The company's operating margin expanded 70 basis points (bps)
to 30.5% in the reported quarter, gaining from the change in the
revenue mix and higher franchise royalties.
In the fourth quarter, cheese cost declined 5.2% year over
year to $1.83 per pound. However, the cost of the company's
overall commodity basket increased 1.6%. Higher commodity price
adversely impacted the company's supply-chain margin.
Full-Year 2013 Highlights
Adjusted earnings per share in full-year 2013 were up 21.3%
year over year to $2.45 per share, beating the Zacks Consensus
Estimate of $2.43 by 0.8%. Revenues were $1.80 billion, up 7.4%
year over year, but in line with the Zacks Consensus
During the fourth quarter, Domino's Pizza unveiled 62
restaurants while closing 15 stores, thus bringing the domestic
store count to 4,986 at the end of the quarter. The company's
international store count came in at 5,900 at quarter-end with
the opening of 286 units and shutting down of 13 stores.
At quarter-end, cash and cash equivalents were $14.4 million
as compared with $32.1 million at the end of the third quarter.
Long-term debt, less current portion at the end of the third
quarter, remained flat at $1.5 billion.
Share Repurchase & Dividend
During the third quarter, the restaurateur repurchased 297,203
shares worth $20.2 million. Currently, shares worth nearly $200
million are remaining under the existing share repurchase
During fourth quarter, Domino's hiked its quarterly dividend
by 25% from 20 cents to 25 cents per share. The new dividend will
be paid on Mar 28, 2014 to shareholders of record on Mar 14.
In the long term, management continues to expect domestic and
international same-store sales growth of 2-4% and 3-6%,
respectively. The company expects net unit growth within the long
term target range of 4-6% .
For 2014, commodity cost is expected to be flat to down 2%
from 2013 levels.
Domino's Pizza has been posting impressive results for the
past few quarters on the back of higher traffic and unit
We believe the company has compelling growth drivers like
digital ordering and expansion into the Pan Pizza category, which
will sustain the revenue momentum in future quarters. Store level
economics of Domino's Pizza is relatively strong. This Zacks Rank
#2 (Buy) company's international operations also promise immense
Other Stocks to Consider
Some other stocks that are currently performing well in the
restaurant industry include
Fiesta Restaurant Group, Inc.
Brinker International, Inc.
Buffalo Wild Wings Inc.
). While Fiesta Restaurant sports a Zacks Rank #1 (Strong Buy),
Brinker and Buffalo Wild Wings have a Zacks Rank #2 (Buy).
BUFFALO WLD WNG (BWLD): Free Stock Analysis
DOMINOS PIZZA (DPZ): Free Stock Analysis
BRINKER INTL (EAT): Free Stock Analysis
FIESTA RESTRNT (FRGI): Free Stock Analysis
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