Domino's Pizza Inc.
) first-quarter 2014 adjusted earnings of 68 cents per share beat
the Zacks Consensus Estimate of 66 cents by 3.0% and the year-ago
quarter's figure of 58 cents by 15.3%. The upside was driven by
higher top line, margin expansion and lower share count.
Quarterly revenues increased 8.7% year over year to $453.9
million and surpassed the Zacks Consensus Estimate of $441.0
million by 3.0%. The revenues were driven by higher supply chain
revenues from higher commodity prices and increased volumes,
higher international revenues resulting from both same-store
sales and store count growth, and increased domestic franchise
and company-owned store revenues.
Inside the Headline Numbers
Domino's Pizza's domestic stores (company-owned and franchise
stores included) comps were up 4.9% with company-owned and
franchise comps rising 1.5% and 5.2%, respectively. However, the
company's domestic comps were lower than the year-ago level of
6.2% but up from fourth-quarter comps of 3.7%.
Comps took a higher jump in the international stores recording
7.4% growth (foreign currency translation excluded). The
international comps were also better than the prior- quarter
comps of 7% and from the year-ago level of 6.5%.
Excluding the impact of foreign currency translation, global
retail sales (total sales of franchise and company-owned units
included) were up 11.3% year over year. However, including the
foreign currency translation impact, sales were up 9.1%.
Increased order count and higher comps drove the global retail
sales during the quarter.
The company's operating margin declined 90 basis points (bps) to
30.2% in the reported quarter, due to higher food and commodity
costs. In the quarter, cheese cost increased 29.3% year over year
to $2.16 per pound. As a result, higher commodity price affected
the company's supply-chain margin, which rose 12.1% year over
year to $230.4 million.
During the quarter, Domino's Pizza unveiled 14 domestic
restaurants while closing 9 stores, thus bringing the domestic
store count to 4,991. The company's international store count
came in at 5,997 at quarter-end with the opening of 109 units and
shutting down of 12 stores.
During the first quarter of 2014, the company repurchased 0.22
million shares of its common stock for approximately $15.1
million. Subsequent to the first quarter of 2014 and till Apr 24,
2014, the company repurchased 153,812 shares of its common stock
for approximately $11.4 million. As of Apr 24, the company had
approximately $188.6 million remaining under its current share
For 2014, commodity costs are expected 4% to 6% in 2014 versus
2013 levels, primarily due to the recent increase in commodities.
Domino's Pizza has been posting impressive results consistently
for the past few quarters on the back of higher traffic and unit
growth. The company's international operations promise
significant growth potential. We believe the company's digital
ordering system and its foray into the Pan Pizza category will
help sustain top-line momentum. However, weak consumer spending
environment owing to macroeconomic pressures and higher commodity
costs poses a headwind.
Domino's Pizza currently carries a Zacks Rank #2 (Buy). Other
stocks worth considering in the restaurant industry include
The Wendy's Co.
Burger King Worldwide, Inc.
Buffalo Wild Wings Inc.
). While Wendy's sports a Zacks Rank #1 (Strong Buy), Burger King
and Buffalo Wild carry the same Zacks Rank as Domino's Pizza.
BURGER KING WWD (BKW): Free Stock Analysis
BUFFALO WLD WNG (BWLD): Free Stock Analysis
DOMINOS PIZZA (DPZ): Free Stock Analysis
WENDYS CO/THE (WEN): Free Stock Analysis
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