The improving sales prospects for Domino’s Pizza Inc. could help deliver a boost for slumping cheese prices.
Domino’s, which owns or franchises more than 4,900 U.S. locations, projects domestic same-store sales to increase 1 percent to 3 percent this year from last year, the company said in its fourth-quarter earnings statement today. International same-store sales are expected to rise 3 percent to 5 percent, Domino’s said.
The company’s efforts to retool and promote its pizzas are paying off, resulting in traffic growth in all four quarters of 2009, Domino’s Chief Executive Officer David Brandon said. Domestic same-store sales rose 0.9 percent for all of 2009, Domino’s said.
Growth was “most significant” during the fourth quarter,
Increased pizza consumption may help trim excess cheese supplies and provide a lift for beleaguered dairy producers still reeling from a milk-price crash. Pizza generates about $32.5 billion in annual restaurant and grocery store revenue, and about a quarter of all cheese sold is used to make pizza, according to Dairy Management Inc., which manages the national dairy checkoff program.
Domino’s is the second-biggest
The same-store sales outlook is “some much needed good news for the market,” said Scott Brown, a livestock and dairy economist at the Food and Agricultural Policy Research Institute in
“We have seen some economic growth in the
At the end of January,
CME Group block cheddar cheese, an industry benchmark, last week fell to $1.34 a pound, the lowest since August.
Cheese prices will likely stay below $1.40 a pound for a few months without some additional cheese sales, Brown said. “We have a ways to go yet, but this hopefully is the start of good news on the demand front,” he said.
Ann Arbor, Mich.-based Domino’s, in the wake of complaints about the taste of its pizza, last year reworked its recipe and rolled out a nationwide advertising campaign.
In November, Brandon, the Domino’s CEO, told Dairy Herd Management that using more cheese was yielding benefits.
The company’s “cheese-enhanced” American Legends pizzas accounted for a double-digit share of overall pizza sales, and the share is growing,
“When you talk about a product that achieves double-digit mix in its first year of introduction, that is big,”
Domino’s said fourth-quarter net income rose to $23.6 million from $11 million a year earlier, while sales increased to $462.9 million, up 8.1 percent. Per-share profit, excluding one-time items, rose to 30 cents from 19 cents, topping analysts’ estimates by about 5 cents.
Shares of Domino’s rose 54 cents, or 4.2 percent, to $13.28 in late trading today. A close at that level would be the highest since September 2008. The stock is up about 58 percent so far this year.