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, Brandon said in today’s statement. “This positive momentum has continued thus far in 2010, as sales and traffic have increased significantly since the launch of our new core pizza.”

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 U.S. pizza chain by sales, next to Pizza Hut, according to food industry consultant Technomic, Inc.

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 Columbia, Mo. “We must have some demand growth if we want milk prices to move higher and stay higher in 2010.”

“We have seen some economic growth in the U.S., but thus far haven't seen much boost to dairy product sales,” Brown said. Domino’s offers an indication “that we may be getting recovery and should start to tighten cheese inventories.”

At the end of January, U.S. cheese inventories totaled 980.8 million pounds, up 11 percent from a year earlier, according to U.S. Department of Agriculture data.

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, Brandon said.

“When you talk about a product that achieves double-digit mix in its first year of introduction, that is big,” Brandon told Dairy Herd Management.

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.