Domino’s Pizza: Announces Q4 and Fiscal 2017 Results

Ann Arbor / MG. (dp) Domino’s Pizza Inc., the largest pizza company in the world based on global retail sales, announced results for the fourth quarter and fiscal 2017, comprised of strong growth in same store sales, global store counts and earnings per share. Domestic same store sales grew 4.2 percent during the quarter versus the year-ago period, and 7.7 percent for the full year, continuing the positive sales momentum in the Company’s domestic business. The international division also posted positive results, with same store sales growth of 2.5 percent during the quarter and 3.4 percent for the full year. The fourth quarter marked the 96th consecutive quarter – or 24th year – of positive international same store sales growth and the 27th consecutive quarter of positive domestic same store sales growth. The Company also had fourth quarter global net store growth of 422 stores, comprised of 96 net new domestic stores and 326 net new international stores. In fiscal 2017, the Company opened 1’045 net new stores, comprised of 216 net new domestic stores and 829 net new international stores.

Fourth quarter diluted EPS was USD 2.09, up 41.2 percent over the prior year quarter; fiscal 2017 diluted EPS was USD 5.83, up 35.6 percent over the prior year. Fiscal 2017 diluted EPS, as adjusted, was USD 5.91, up 37.4 percent over the prior year diluted EPS of USD 4.30.

On February 14, 2018, the Board of Directors declared a 55-cent per share quarterly dividend for shareholders of record as of March 15, 2018 to be paid on March 30, 2018. This represents an increase of approximately 20 percent over the previous quarterly dividend amount.

«Without question, we are pleased with our fourth quarter and full-year 2017 performance – with results that continued to outpace the industry», said J. Patrick Doyle, President and Chief Executive Officer. «Our 2017 global retail sales growth and domestic comps outperformed the high-end of our stated three to five-year outlook. This, along with tremendous net store growth and an incredibly low number of closures, helps validate that our long-term fundamental strength is well intact heading into 2018».

Fourth Quarter and Fiscal 2017 Highlights

(USD in millions, except per share data)

Q4/2017

Q4/2016

Fiscal 2017

Fiscal 2016

Net income

USD

93.3

USD

72.7

USD

277.9

USD

214.7

Weighted average diluted shares

44’593’094

49’090’074

47’677’834

49’923’859

Diluted earnings per share, as reported (1)

USD

2.09

USD

1.48

USD

5.83

USD

4.30

Items affecting comparability (2)

–

–

0.08

–

Diluted earnings per share, as adjusted (1) (2)

USD

2.09

USD

1.48

USD

5.91

USD

4.30

(1) In the first quarter of 2017, the Company adopted Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, (ASU 2016-09), which requires the Company to record excess tax benefits from equity-based compensation as a reduction of the provision for income taxes in the income statement, whereas they were previously recognized in equity. See the “Adoption of New Accounting Guidance” section on page three for additional information.
(2) Refer to the Items Affecting Comparability section on page four for additional details. See also the Comments on Regulation G section on page five.

• Revenues were up 8.8 percent for the fourth quarter versus the prior year quarter, due primarily to higher supply chain revenues from increased volumes. Higher royalties derived from our retail sales in both our international and domestic markets also contributed to the increase in revenues. Consolidated revenues also benefited from the positive impact of foreign currency exchange rates.
• Net Income increased 28.3 percent for the fourth quarter versus the prior year quarter, primarily driven by an increase in global royalty revenues as well as higher supply chain volumes. The adoption of the new equity-based compensation accounting standard also positively impacted net income by approximately USD 6.8 million. See the “Adoption of New Accounting Guidance” section on page three for additional information. Additionally, the pre-tax gain on the sale of certain domestic Company-owned stores to franchisees in the fourth quarter resulted in a USD 4.0 million decrease to our consolidated general and administrative expenses. These increases were partially offset by a pre-tax USD 5.3 million increase in net interest expense for the fourth quarter as compared to the prior year as a result of higher net debt levels following our 2017 recapitalization transaction.
• Diluted EPS was USD 2.09 for the fourth quarter versus USD 1.48 in the prior year quarter. This represents a 61-cent or 41.2 percent increase over the prior year quarter. This increase was driven by higher net income, as well as lower diluted share count, primarily resulting from share repurchases.

The table below outlines certain statistical measures utilized by the Company to analyze its performance. Refer to the Comments on Regulation G section on page five for additional details.

		Q4/2017		Fiscal 2017
Same store sales growth: (versus prior year period)
Domestic Company-owned stores		+ 3.8%		+ 8.7%
Domestic franchise stores		+ 4.2%		+ 7.6%
Domestic stores		+ 4.2%		+ 7.7%
International stores (excluding foreign currency impact)		+ 2.5%		+ 3.4%
.
Global retail sales growth: (versus prior year period)
Domestic stores		+ 7.6%		+ 11.1%
International stores		+ 15.6%		+ 14.2%
Total		+ 11.7%		+ 12.7%
.
Global retail sales growth: (versus prior year period, excluding foreign currency impact)
Domestic stores		+ 7.6%		+ 11.1%
International stores		+ 12.0%		+ 14.8%
Total		+ 9.9%		+ 13.0%

.

		Domestic Company-owned Stores		Domestic Franchise Stores		Total Domestic Stores		International Stores		Total
Store counts:
Store count at September 10, 2017		399		5’092		5’491		8’943		14’434
Openings		10		92		102		339		441
Closings		–		(6)		(6)		(13)		(19)
Transfers		(17)		17		–		–		–
Store count at December 31, 2017		392		5’195		5’587		9’269		14’856
Fourth quarter 2017 net change		(7)		103		96		326		422
Fiscal 2017 net change		–		216		216		829		1’045

.

Share Repurchases

During the fourth quarter, the Company repurchased and retired 937’026 shares of its common stock under its open market share repurchase program, including 659’807 shares received at final settlement of our previously disclosed USD 1.0 billion accelerated share repurchase program. The remaining 277’219 shares were repurchased and retired during the fourth quarter for approximately USD 51.5 million at an average price of USD 185.89 per share. During fiscal 2017, the Company repurchased and retired a total of 5’576’249 shares of its common stock for approximately USD 1.06 billion at an average price of USD 190.85 per share. The Company had approximately USD 198.5 million remaining under its USD 1.25 billion authorization for share repurchases as of December 31, 2017.

On February 14, 2018, the Board of Directors authorized a new share repurchase program to repurchase up to USD 750.0 million of the Company’s common stock. This repurchase program replaces the remaining availability of approximately USD 198.5 million under the Company’s previously approved USD 1.25 billion share repurchase program.

Three to Five-Year Outlook

The Company does not provide quarterly or annual earnings estimates. The following outlook does not constitute specific earnings guidance. In January 2018, the Company reaffirmed its three to five-year outlook as follows:

		Current Outlook
Domestic same store sales growth		3% – 6%
International same store sales growth (1)		3% – 6%
Net unit growth		6% – 8%
Global ret ail sales growth (1)		8% – 12%
(1) Excluding foreign currency impact