Domino’s Pizza reports 2018 profit of $362M

Breana Noble
The Detroit News
Domino's Pizza reported fourth-quarter net income of $111.6 million, a 20 percent rise, on $1.08 billion in revenue, a 21 percent increase.

Domino's Pizza Inc. reported on Thursday an increase of 30 percent year-over-year in net income for 2018.

The rise to $362 million comes despite slowing international sales and a 33 percent increase in capital expenditures over the year, as the Ann Arbor-based pizza maker invests into its supply chain, artificial intelligence and other technologies.

"By focusing on the long game and what matters, I’m extremely confident we are well-positioned for success, CEO Ritch Allison said on a call with analysts. "2019 is only the beginnings of our position to win and accomplish our long-term goal of dominant No. 1."

The profit was on a $3.4 billion revenue, a 23 percent increase. Diluted earnings per share was up 43 percent to $8.35.

Sales growth slowed from a 12.7 percent rise in 2017 to a 10.6 percent increase in 2018. U.S. same-store sales increased 6.6 percent in 2018. International same-store revenue grew 3.5 percent, though the division's overall sales rose 9.9 percent in 2018, down from 14.2 percent in 2017.

"With respect to the international comp, we’d certainly like to see that higher. We’ll be transparent with you on that," Allison said. "Even with a little bit of weakness, the product of that comp and the unit growth, I'm still quite pleased with the growth trajectory in the business."

Domino's Pizza also reported fourth-quarter net income of $111.6 million, a 20 percent rise, on $1.08 billion in revenue, a 21 percent increase. Earnings per share was $2.62 for the period, a 25 percent increase.

Changes in accounting primarily benefited the company's revenue in recognition of $112.9 million in U.S. franchise advertising revenues.

U.S. same-store sales increased 5.6 percent during the quarter year over year, and international same-store sales grew 2.4 percent, the 100th consecutive quarter of growth for the international division. Retail sales in total grew 6.5 percent for the period.

Retail increases, along with 125 net new U.S. stores and 435 net new international stores as well as U.S. franchise royalty increases, partially were offset by decreases in international franchise fees from the negative impact of foreign currencies, the company said.

The company earlier this month introduced new artificial intelligence capabilities to its app, allowing users to take photos of any pizza — even a dish not from Domino's — and get credits toward a free pizza in efforts to have customers sign up for its Piece of the Pie Rewards loyalty program, Allison said. In January, the company said the program had 20 million users in the previous six months.

The company also is looking into how it can use technology behind the counter to reduce labor expenses, Domino's chief financial officer Jeff Lawrence said.

During the fourth quarter, a new supply chain center opened in New Jersey, and two more are expected to churn out dough in South Carolina and Texas this year.

Domino's also reaffirmed its projections of 6-8 percent growth over the next three to five years. Shares are up 22 percent over the past year. In pre-market trading, however, Domino's stock was tumbling nearly 10 percent to $251.88 Thursday morning.