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Panned Pizza at Domino's

By Rick Munarriz – Updated Nov 15, 2016 at 12:23AM

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So-so sales in the U.S. lead to a flat first quarter.

A pizza is flat, and so was the latest quarter at Domino's Pizza (NYSE:DPZ). Sluggish domestic comps and the sale of some company-owned restaurants overseas to a master franchisee stung the company's top line. A hefty recapitalization charge added more pain on the way down to the bottom line.

Revenues dropped by 2% to $339.3 million for the first quarter. Earnings, before the recapitalization writedown, fell by a penny per share to $0.38.

What's the deal, Domino's? You take those tasty Fudgem brownies off the menu. You fatten shareholders with a chunky $13.50 per-share one-time dividend. Now your own financial performance could use a little more fudge and pocket change.

The thing is that Domino's is still rocking, once you get out of the United States. International comps have risen for an amazing 53 consecutive quarters. Unfortunately, things stink closer to home, where comps fell by 2.9% for the period, and more domestic Domino's locations closed than opened during the quarter.

Yes, it can be pretty competitive in the pizza delivery market. Papa John's (NASDAQ:PZZA) is a feisty competitor. Pizza Hut -- one of the three Yum! Brands (NYSE:YUM) major chains -- is promoting a new hand-tossed pizza that it claims is better than the competition. You also have casual concepts like Pizza Inn (NASDAQ:PZZI), Little Caesars, and Cici's that are practically giving away the pies. Heck, even Panera (NASDAQ:PNRA) is baking up Crispani pizzas for the dinner crowd at many of its locations.

Taking on more debt to complete the recapitalization process wasn't the right thing to do. Competitors are fierce, and the more leveraged balance sheet will make it hard to remain nimble. The outlook may not be as negative as the company's book value, but it's not going to get any easier at Domino's in the near term.

For more pick and pans from the pizza industry, check out:

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Longtime Fool contributor Rick Munarriz did what he could to boost Domino's comps this past quarter, taking advantage of those generous online coupons. He does not own shares in any of the companies in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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Stocks Mentioned

Domino's Pizza, Inc. Stock Quote
Domino's Pizza, Inc.
DPZ
$330.00 (3.08%) $9.86
Panera Bread Company Stock Quote
Panera Bread Company
PNRA
Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
YUM
$110.65 (-0.13%) $0.14
Papa John's International, Inc. Stock Quote
Papa John's International, Inc.
PZZA
$75.15 (1.39%) $1.03
RAVE Restaurant Group, Inc. Stock Quote
RAVE Restaurant Group, Inc.
RAVE
$1.30 (12.07%) $0.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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