ANN ARBOR Mich. Domino’s Pizza Inc. reported a 22.4-percent drop in second-quarter profit as foreign currency conversions hurt systemwide sales gains and U.S. sales continued to suffer.
Achange to the company’s stock option plan also hurt corporate earnings by $4.9 million, before taxes, the company said.
For the quarter ended June 14, Domino’s earned $14.5 million, or 25 cents per share, compared with earnings of $18.7 million, or 32 cents per share, in the same quarter a year ago.
Total revenue in the latest quarter fell 5.3 percent to $316.6 million, mainly on the strengthening U.S. dollar, which hurts currency conversion rates and the amount of foreign royalties. Domino’s global retail receipts fell 4.7 percent, it reported, reflecting a drop of 8 percent in international markets and 2 percent in the United States. Without the foreign currency fluctuations, global system sales would have increased by 3.8 percent, the company said.
International same-store sales rose 4.1 percent, while domestic same-store sales fell 0.7 percent. The company blamed the U.S. decline on negative publicity from a viral video released during the quarter by employees of a Domino’s franchisee doing what chief executive David Brandon called “inappropriate handling of food.”
Those employees were fired and prosecuted, but the effects on sales were “pretty abrupt and pretty measurable,” the company said. Brandon added, however, that he did not expect the video to have a lasting effect on sale. The incident allowed the company to collect a $2 million settlement in business interruption insurance.
Domino’s said its lunch traffic is growing, in part, because of the debut of oven-baked sandwiches and bread bowl pastas.
During the quarter the company closed 20 U.S.-based units and paid down $12.9 million in debt. Domino’s operates or franchises 8,873 locations worldwide.
Contact Bret Thorn at [email protected].
