Domino's Pizza (NYSE:DPZ) finally delivered the goods to investors. Earnings were better than expected, and the top line helped drive the results.
After five straight quarters of same-store sales declines in the U.S., the company reported an increase of 2.1%. International comps, which had been doing well, rose 3.9%. Excluding recapitalization costs and legal reserves, earnings were $0.28 a share, handily beating Wall Street's $0.24 expectation. Still, this was down from $0.39 a year earlier.
The company still faces issues affecting all restaurants, and particularly pizza makers. These include higher cheese prices, which account for about one-third of a pizza, as well as contending with increased expenses for other commodities as well as energy bills. Papa John's (NASDAQ:PZZA), for one, is facing the same issues.
Nonetheless, despite dealing with the same economic issues as other casual dining restaurants -- consumers are being squeezed by high gas and goods costs, and the housing downturn -- the results are quite good. Families can order in cheaper than sitting down in a restaurant. For instance, Friendly Ice Cream (AMEX:FRN), which just agreed to be acquired, reported a disappointing quarter, losing $6 million, with sales down 2.5%.
The Domino's Pizza brand is widely recognized throughout the world, and 91% of domestic pizza consumers are aware of the brand. The company has been able to develop its brand internationally because pizza delivery is relatively underdeveloped. According to Domino's, it is one of only two companies with a significant multinational presence. As consumers outside the U.S. focus on convenience, the market is expected to increase sharply. In fact, its international business is quite good.
I like Domino's business model, which is simple, but proven. It focuses on delivering quality pizza in a timely fashion, with a focused menu of pizzas and complementary side items, and the stores have low capital requirements. While costs may pressure near-term profits, this company is poised to deliver solid results.
For related Foolishness:
Friendly Ice Cream is a Motley Fool Hidden Gems Pay Dirt selection.
Fool contributor Larry Rothman is happy to receive feedback, and promises to read it when not being wrestled by his three children. Feel free to e-mail him. He doesn't have any positions in the companies mentioned.
