Domino’s Domination Continues Unscathed


Source:  Domino's Pizza

What a pleasure it is to pop open the earnings release from Domino's Pizza  (NYSE: DPZ  )  among a sea of gloom-and-doom reports from many food and beverage companies. It helps that folks who are stuck in the house because of the snow tend to order pizza more often, as Papa John's (NASDAQ: PZZA  ) can also attest, but the ongoing stampede of Domino's Pizza has been going on for some time.

The extra-large results
Domino's Pizza reported fiscal first-quarter earnings on May 1, five days ahead of the report from Papa John's. Domestic same-store sales popped 4.9%. International same-store sales leaped 7.4%. It was the 81st quarter in a row, or over two decades, of uninterrupted quarterly international same-store sales growth for Domino's. Adjusted diluted earnings per share jumped 15.3% to $0.68.

President and CEO J. Patrick Doyle credited "innovations in both technology and food." During the conference call, Doyle noted that Domino's new handmade pizza helped play a positive role. Domino's also increased its store count by an additional 102 restaurants during the quarter and just recently crossed the 11,000-restaurant milestone.

Then there were the winter storms. While many restaurants complained about the weather, it was actually a boon for Domino's Pizza and Papa John's. Domino's Pizza estimated that the weather actually increased its sales between 1% and 1.5% for the quarter.


Source:  Papa John's

Papa knows best
Lance Tucker, CFO of Papa John's, only touched on this subject briefly during the Q&A session of Papa John's conference call. He stated, "We typically don't attribute much by way of our comps, good or bad, to weather. What I think we can say is we may have gotten a little bit of benefit, but in light of a 9.6% domestic comp, certainly it wasn't the lion's share of what happened."

For Papa John's, domestic same-store sales soared 9.6% as Tucker stated. International same-store sales flew 6.4%. Earnings per diluted share ticked up 7% to $0.45. The company blamed its somewhat-lackluster EPS rise on "commodity headwinds." Papa John's is likely experiencing the same ingredient pressure that is affecting Domino's Pizza; cheese prices rose from $1.67 per pound to $2.16 per pound over the period.

Neither company is blinking
In the big picture, although cheese prices and the like might hit the media as some terrible event that will bring the pizza joints to their knees, neither Domino's Pizza nor Papa John's seem worried.

John Schnatter, founder and CEO of Papa Johns, stated:

I'm extremely confident that we will continue to drive the business forward globally by building on the quality advantages we have established over the past 30 years. We will also continue to capitalize on digital expertise, with our industry-leading digital sales mix approaching 50% of total sales and almost 60% of all delivery sales.

Domino's Pizza's Doyle stated:

We're off to a great start to the year. Our international division, once again, posted stellar results – reinforcing what a growth engine they are for us. We're thriving in the U.S., too, with sales and store growth, and innovations in both technology and food. Franchisees have reported strong profits. Our shareholders benefited from both dividends and share repurchases. We're driving results.

Foolish final thoughts
It's probably hard for both Domino's Pizza and Papa John's not to be confident. The two of them have both been so successful with growth every quarter that it's almost routine and boring. Boring can be good and very profitable to your portfolio as it implies sustainability and consistency.

Pizza isn't the only huge opportunity coming to your living room
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

 


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