Domino's Pizza, Inc. (NYSE: DPZ) saw its Q3 profit drop by a staggering 55% as reported this morning. Domino's management explained the root causes as weak consumer spending added with cost pressures. Cost pressures? Apparently, either the cost of making pizza has changed big-time in the last three months, or gas prices and commodity food product prices have gone up. I'll take the latter -- you?For the Q3 period, Domino's net income dropped to $10.99 million or $0.17 per share from $24.5 million or $0.39 per share in the year-ago quarter. Most analysts expecting about $0.23 EPS. The food company's quarterly revenue rose 3.2% to over $337 million as international sales became the star of the quarter. CEO David Brandon suggested that trying to mix increasing prices with declining traffic was a challenge in the quarter. Also mentioned was ... wait for it ... higher food costs. Milk prices (cheese) indeed went up, but at the butt-end of Q3, not during the whole period. Could this be an excuse?
While weak domestic consumer spending hampered sales, international sales did just the opposite, increasing 8.3% for the quarter. Have Domino's done enough in the Q3 period to goose more sales from customers, if that was even possible? I'll say that Papa John's International (NYSE: PZZA) advertised like crazy in my area this past quarter -- on television, newspapers and in other areas. I saw next to nothing from Domino's. I wonder if the company is masking "declining sales" with "losing business to the competition?"
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Reader Comments (Page 1 of 1)
10-16-2007 @ 10:59AM
WhoseAskingU said...
If they are delivering those pizzas I'll bet the increased cost of gas is really hurting them. Plus the cost of their supplies has gone up because they are delivered (gas) to them. Also,the cost of food (their ingredients) has gone up. All those increases mixed with a decrease in consumer spending and the outcome is not surprising. I assume many other companies will have the same problems.
10-16-2007 @ 11:21AM
Taylor said...
It's easy to see why they are failing. It's their prices and the quality of their food. Yes I know energy and food prices have risen, but they are making the same mediocre product and nearly charging $20.00 for a large pan. I can buy a large pan from a local premium vendor, higher ingredient quality, it's delivered hot, and the delivery person speaks English. Why should I buy generic mass produced swill for the same price ? Dominos needs to hold it's costs down, focus on it's core product and stop making all these ridiculous side items few people want. Their brownie dessert thing repulsed most people and the ads were disgusting. Wake up and do your core function well.
11-13-2007 @ 1:10PM
giray said...
Hello, rising gas prices has hurt the drivers , truck deliveries to outlets ,this is true BUT first of all they make stupid food ideas like brownies for dessert and now oreo cookie pizza instaed of something like canoli with is in line with ethnic thinking of this type of food, next Mr Brandon must step down , he was never a food man and does not even look like a person who ever made or baked a pizza , they should and must make a sicilian square new york style pizza , the brooklyn style pizza is bad, people in brooklyn would laugh if they eat this product, i still believe in dpz and think their future is still good, they should also put a little package of celery with the wings because for the price they are not that good , how about bottled water at outlets- everybody does not drink soda GIVE ME A 2 TIMES TUESDAY HOO-HA
12-07-2007 @ 3:37PM
piscesmike said...
The truth of the matter is that prices for ingredients started going up way back at the beginning of 2006... Domino's held off raising prices, as not to pass them on the the consumer. Usually the price will go up, then come back down. Unfortunately, the declining cycle is something that never materialized. Domino's took a hit in profits to cover the additional expenses, but with no end in site, there was no other choice. Also one other thing, is the increase in minimum wage. This is one everyone seems to just completely ignore, but take 20 employees, making 5.15 an hour, then raise them all to 6.25, your losing money. People generally think raising minimum wage is a good thing, but the reality is that the raise is minimum wage is offset by an increase in prices everywhere else along the line.... remember when a movie used to cost $4.25? and now it's $8.00? Same principle, if you have to pay your employees more, you have to charge more. I am a general manager for Domino's pizza (store #4464).... and believe me I don't want to tell anyone that a large one topping pizza is gonna be $15 and some change, but the reality of the situation is that for pizza delivery to survive (all pizza not just Domino's- I used to work for Papa John's too), it has to become more of a luxury instead of a convenience.
12-15-2007 @ 11:36PM
ExDriver said...
"but take 20 employees, making 5.15 an hour, then raise them all to 6.25, your losing money."
Riiiiiiiiiiight, so that explains why DP is moving more and more of its drivers to "tipped" employee status ( and paying sub minimum wage ) while still not reimbursing its drivers the actual cost of taking deliveries with their own personal cars, nor telling them that their own auto insurance is null and void while delivering DP's product. Personally, I dont have much positive to say about this disgusting company. Want to know why sales are flat? They hire people nobody else wants, wont keep the ones they should, and treat all of their frontline employees like crap.