I recently wrote about how well Papa John's (NASDAQ:PZZA) has been performing despite the plethora of competition in the world of pizza. It seemed that it had found the right mix to appeal to a majority of pizza fans and was winning the pizza battles. However, despite the recent strength of Papa John's, Domino's (NYSE:DPZ) won't be toppled from the top spot.
Domino's reported first-quarter earnings that soared 36% to $25 million, or $0.35 per share. It credited the gains to improved distribution business and strong sales across the board.
Those sales were definitely worth admiring, increasing by double digits in each segment. In the U.S., Domino's company-owned stores increased sales by 12% to $98.2 million. Its franchised locations gained 13% to $39.2 million. And the international market did its part, increasing sales by 20% to $30.4 million.
Often, impressive sales results like those are somewhat skewed by an increase in the number of locations. That's why I like to see how the same-store (comp) sales are performing. This figure measures the change in sales at only the locations that also had sales in the comparable period of the prior year. Domino's was just as strong in this metric, with U.S. comp sales increasing 11.2% and international comp sales up 8.5%.
One concern I have with Domino's is its large amount of debt. At the end of the quarter, it had an outstanding debt balance of $752.9 million. That's some serious dough, but it's actually down $183.6 million from last year. Its borrowing rate also decreased from 5.8% to 5.3% despite higher market interest rates. The company was able to lower its rate because it made prepayments towards senior notes. These factors combined to decrease its net interest expense by 25.2%.
At the same time, the company continues to give back to its shareholders, paying out a decent dividend yielding about 2% and repurchasing 4.4 million shares. And even with the price of the stock rising over 5% on the news, Domino's maintains a forward P/E of about 17.
With a strong performance from Domino's following the one from Papa John's, investors may want to make room for some pizza. It certainly seems like there are plenty of slices to go around.
Three Foolish takes on the pizza business, hold the anchovies:
Fool contributor Mike Cianciolo welcomes feedback and doesn't own shares of any of the companies in this article.
