Domino's sales surge in 3Q

Company says marketing for new pizza continues to drive traffic

Domino's Pizza Inc. reported a double-digit increase in third-quarter sales as an aggressive marketing campaign for its reformulated pizza continued to drive traffic.

Same-store sales at domestic Domino's units rose 11.7 percent for the Sept. 12-ended quarter, which was entirely traffic-driven, as check averages were down slightly, company officials said in a conference call Tuesday. International same-store sales were up 7 percent in the quarter.

Domino's third-quarter net income declined 6.9 percent to $16.6 million, or 27 cents per share. That compares with profit of $17.8 million, or 31 cents per share, in the year-ago quarter, when the company booked $14.2 million in gains from debt extinguishment.

Revenue in the latest quarter rose 14.8 percent to $347.8 million, which Domino's attributed to higher volumes and commodity prices in the supply chain of the company, which is 91 percent franchised domestically, as well as higher same-store sales.

J. Patrick Doyle, Domino's president and chief executive, said the company’s performance was due to “markedly better TV commercials” that contained a “transformative message that is transparent and honest.”

He said that message continues to work 10 months into Domino's new marketing strategy, which coincided with the launch late last year of its reformulated pizza.

"We're pleased that people love our reformulated pizza, the value of our offer and our honest and straight-forward communication of our brand values," he said in a statement. "We're a new Domino's. This quarter has proven that our strategy is working, resulting in higher sales, operating income and cash flows."

In the current fourth quarter, Domino's has shifted the focus to higher-priced specialty pizzas with the addition of the new Wisconsin 6 Cheese pizza to its American Legends line. The chain is offering two medium American Legends pizza for $7.99, which officials said could help drive up sales as well as margins.

Domino's officials warned that an additional week in last year's fourth quarter will affect earnings comparisons for the current quarter. They also cautioned that last year’s performance was given an extra boost by the launch of the new pizza, and that higher cheese prices this year also will likely affect performance at the end of this year.

Domino's franchisees opened 12 units domestically in the third quarter but closed 16, while international franchise partners added 78 units in the past quarter and closed two stores.

Ann Arbor, Mich.-based Domino's ended the quarter with a total of 9,169 stores, including 4,905 domestic locations and 4,264 international branches.

Contact Bret Thorn at [email protected]