For a company that just a couple of months ago humbly admitted that its product was "lacking" and its pizza crust tasted like "cardboard," Domino's Pizza (DPZ) certainly seems to be feeling confident these days. The Ann Arbor, Mich.-based company is now boasting a whole new taste -- and some pretty impressive profit growth, as well.
Earlier this week, Domino's, America's second-largest pizza chain, reported that fourth quarter profits more than doubled year over year to $23.6 million from $11 million. Total revenue for the quarter came in at $462.9 million, an 8.1% increase over last year, with U.S. same-store sales climbing 1.4% and international same-store sales increasing by 3.9%.
While the earnings boost is partially attributable to better margins and lower interest expenses, one big motivator has been the company's new and improved recipe. "Traffic growth was the most significant in the fourth quarter; and this positive momentum has continued thus far in 2010, as sales and traffic have increased significantly since the launch of our new core pizza," said Domino's chairman and CEO, David A. Brandon, in the company's earnings statement.
John Staszak, a gaming, restaurant and hotel analyst at Argus Research says Domino's resurgence won't be a one-quarter phenomenon. The "new menu and new products are a very impressive effort," he said. Looking forward, he is convinced that the company's year-over-year growth will continue.
Eating Crow: A Risky Campaign
Any time a company broadcasts that its customers think its core product is "mass-produced, bland and boring," it's a risky move. But Domino's somehow managed to use its humility to its advantage.
The question remains, however, has Domino's really improved the pizza's taste?
Of course, the only way to get a real feel for Dominos' long-term potential is to get a peek under the cheese. So DailyFinance ordered two pepperoni pizzas -- one thin crust and one hand-tossed -- from the chain. While the hungry reviewers were impressed with the speed and efficiency of the delivery, they were generally underwhelmed by the thin crust pizza. "This is the improved version?" one scoffed upon biting into the crispy pizza. Another noted that Domino's "New Robust Tomato Sauce" wasn't very... well, robust.
The hand-tossed crust was the more popular of the pies. "The bread might be better than it used to be," said one taster; while another noted that "it seems to have more spices." One staffer claimed it was "almost as good as my local Sicilian." Then again, the reviewer admitted: "My local Sicilian can be really terrible sometimes."
But did Dominos' new recipe convince the DailyFinance staffers to switch back to the brand? Not really. At almost $14 per pie, the price rivals that of non-chain pizzerias, while the pizza itself -- for all its improvement -- fell short of our favorite neighborhood pizzerias (of course, most of us live in and around New York City, a pizza-making Mecca).
Then again, as one reviewer admitted, there are those times when you "just crave Dominos" on a dark and lonesome night. And therein may lie Dominos' greatest strength: Like an old friend, it's consistent, reasonably good and always there when you call. If it tastes a little bettter, well than that's just an added bonus.