Domino's Pizza Inc.
) third-quarter 2013 adjusted earnings of 51 cents per share
missed the Zacks Consensus Estimate by a penny but beat the
year-ago quarter's earnings of 43 cents by 18.6%. The company's
higher top line, margin expansion and lower share count boosted
earnings per share during the quarter.
Quarterly revenues increased 6.9% year over year to $404.1
million and beat the Zacks Consensus Estimate of $403 million by
0.3%. Higher comparable restaurant sales (comps) growth,
increased domestic store revenues (franchised and company-owned
units included) as well as international sales, improved
supply-chain and unit expansions pushed up Domino's' top line
during the quarter.
Inside the Headline Numbers
During the third quarter, Domino's Pizza's overall domestic
comps were up 5.4% with company-owned units and franchises rising
4.6% and 5.5%, respectively. Domestic comps in the quarter were
significantly higher than the year-ago level of 3.3%.
In the overseas markets, comps remained consistent at
Excluding the effect of foreign currency translation, global
retail sales (total sales of franchise and company-owned units
included) were up 10.2% year over year. However, including the
foreign currency translation impact, sales were up 7.4%.
Increased order count and higher comps drove the global retail
sales during the quarter.
The company's operating margin expanded 40 basis points (bps)
to 29.9% in the reported quarter, gaining from the rise in
volumes offsetting higher food costs. Margin in the quarter also
benefited from the change in the revenue mix.
In the third quarter, the cheese cost remained flat year over
year. With the rise in the cost of meat and boxes, the cost of
overall commodity basket increased 1.8%. Higher cheese price
adversely impacted the company's supply-chain margin.
For 2013, commodity cost is expected to be up 2% to 3% year
over year. However, the commodity cost in 2014 is expected to be
flat with or lower from 2013 levels.
During the third quarter, Domino's Pizza unveiled 12
restaurants while closing five stores, thus bringing the domestic
store count to a total of 4,939. The company's international
store count came in at 5,627 at quarter-end with the opening of
124 units and shutting down of five stores. In 2013, the store
growth is expected to be moderate.
At the end of the quarter, cash and cash equivalents were
$32.1 million as compared with $40.8 million in the second
quarter. Long-term debt, less current portion at the end of the
third quarter, remained flat at $1.5 billion.
During the third quarter, the restaurateur repurchased and
retired 351,085 shares worth $20.8 million.
Though Domino's Pizza missed the third-quarter earnings by a
penny, revenues beat the Zacks Consensus Estimate and also grew
year over year.
Store level economics of Domino's Pizza is relatively strong.
Its international operations promise significant growth
opportunities. Domino's Pizza has been posting impressive results
for the past few quarters on the back of higher traffic and unit
growth. This Zacks Rank #2 (Buy) company's focus on menu
innovation, advertising activities and international expansion
promise immense growth prospect.
Some other players in the restaurant industry which look
attractive at the current level include
AFC Enterprises Inc.
Cracker Barrel Old Country Store, Inc.
Chipotle Mexican Grill, Inc.
). All these companies carry a Zacks Rank #2.
AFC ENTERPRISES (AFCE): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
CHIPOTLE MEXICN (CMG): Free Stock Analysis
DOMINOS PIZZA (DPZ): Free Stock Analysis
To read this article on Zacks.com click here.