Digital delivering growth for Domino’s

by Monica Watrous
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ANN ARBOR, MICH. – Digital technology is delivering growth for Domino’s Pizza, Inc.

“As we meet the needs of customers worldwide, we are redefining convenience and demanding more from every experience with us,” said Patrick Doyle, president and chief executive officer, during a Feb. 25 earnings call with analysts. “Our recently launched Pizza Profiles, which is the ability for consumers to store orders and information, is one of those innovations that’s not only delivering convenience and ordering speed for customers but also providing a building block for other technologies.”

With more than 40% of domestic sales last year from digital channels, Domino’s said it will continue to build on the flexible and scalable technologies it has introduced. In January, the chain unveiled innovation developed with Ford that will allow customers to place an order via voice commands in Ford vehicles equipped with an in-car connectivity system.

“We ended the year with a run rate of about $3 billion in digital sales around the world,” Mr. Doyle said. “It took our company 28 years to hit $3 billion in global retail sales, but just over five years to hit this number in global digital sales, which demonstrates the rapid growth of this platform.”

Strong same-store sales growth and an increase in global store counts led Domino’s Pizza, Inc. to a solid fiscal year.

Net income for the year ended Dec. 29, 2013, advanced to $142,985,000, equal to $2.48 per diluted share on the common stock, up 27% from $112,392,000, or $1.91 per diluted share, the year before.

Total revenues for the year increased 7.4% to $1,802,223,000 from $1,678,439,000 in fiscal 2012.

During the year, Domino’s added 631 stores, with 58 net new domestic units and a record 573 net new restaurants internationally. The company reported same-store sales growth of 5.4% for domestic stores and 6.2% for international stores during fiscal 2013, with 3.7% same-store sales growth for domestic stores and 7% for international stores in the fourth quarter.

The pizza chain also has made progress on its restaurant reimage efforts, with plans to have its entire system reimaged by the end of 2017. The new restaurant designs showcase employees hand-tossing fresh dough and custom-making orders.

“It’s really about opening up the kitchens, making them more inviting, making the carry-out experience far more positive, I think, than it has been,” Mr. Doyle said. “It’s largely about carry-out, but I will tell you, even delivery customers want to know where their food is coming from. If they’ve seen the store once, they’re driving by the restaurant, they want to see that it’s a good-looking place. And so while this is certainly more going to be about carry-out than necessarily delivery, the fact is I think it helps both. It helps the brand overall, which is ultimately going to help sales overall.”

Domino’s has slowed its new product introductions as it focuses on its digital innovation, but Mr. Doyle said the chain’s pipeline isn’t empty.

“I think it would be pretty unusual for us to go in the U.S. a full year without a new product launch,” he said. “While I think you will continue to see far fewer new product launches from us than we may have done five or ten years ago over the course of the year, I also think zero is not going to be a particularly common outcome either.”

Net income for the fourth quarter advanced 19% to $44,663,000, equal to 78c per diluted share, from $37,578,000, or 64c per share, during the fourth quarter of the previous year. Domestic and international same-store sales growth, global store count and a lower effective tax rate benefitted net income during the quarter.

Total revenues for the quarter increased 5% to $566,547,000 from $539,650,000 of the prior-year period, reflecting higher supply chain revenues, higher international revenues and higher domestic franchise and company-owned store revenues.

Looking ahead, Domino’s is targeting domestic same-store sales growth in the 2% to 4% range, 3% to 6% international same-store sales growth and a 4% to 6% net unit growth.
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