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Domino's Pizza Inc. reports yeasty net income more than doubled

by Katharine Lau
March 02, 2010

Domino’s Pizza Inc.’s fourth-quarter profit more than doubled, thanks in part to higher sales after the introduction of a new pizza crust recipe. As a result, the company’s stock was up just over 5 percent during midday trading. 

The Ann Arbor-based pizza delivery company earned $23.6 million, or 41 cents per diluted share, in the quarter ended Jan. 3, more than twice the $11.0 million, or 19 cents per diluted share, earned in the year-earlier quarter. Domino’s Pizza easily beat analysts’ quarterly estimates of 25 cents, as compiled by Zacks Investment Research Inc. 

Sales totaled $462.9 million, up 8.1 percent from $428.2 million in the year-earlier quarter. 

“We really felt momentum building throughout the year, and you may not have seen that necessarily in other parts, but we felt it building. In the fourth quarter, things just started to really click into place,” said David Brandon, Domino’s Pizza's outgoing CEO, in an earnings teleconference Tuesday. “Right now, I just think that we are operating and marketing at peak levels based on my 11 years of experience in the company.” In an unusual career move, Brandon is leaving to become the athletic director at the University of Michigan.

Feltl and Co. Inc. analyst Mark Smith wrote in a note that he was “encouraged” by the strong results, adding that “revenue was better than expected due to strong same-store sales growth.” Like retailers, Domino’s measures sales at outlets open for at least a year, which are known as same-store sales.

“The launch of the new pizza is having a positive impact on sales,” Smith wrote. He maintained his “buy” rating for the company. 

In an unusual TV advertising campaign this year, Domino’s admitted that consumers in focus groups said its crust “tasted like cardboard” and its sauce like “ketchup.” It reformulated its dough and sauce recipes and added herbs for more flavor.

For all of 2009, the company’s net income increased 47.8 percent to $79.7 million, or $1.38 per diluted share, from $54 million, or 93 cents per diluted share, in 2008. Total revenues for the year ended Jan. 3 fell 1.5 percent to $1.40 billion from $1.43 billion. 

Domino’s Pizza’s shares closed Tuesday at $13.38, up 64 cents or 5.0 percent.