UPDATE 4-Domino’s posts stronger-than-expected profit

* Q3 EPS 27 cents vs Street view 25 cents

* Revenue up 14.8 pct to $347.4 million, tops estimates

* Domestic same-restaurant sales up 11.7 percent

* Shares rise as much as 6.7 percent
(Adds CEO comments, details, updates stock action)

By Ben Klayman

DETROIT, Oct 19 (BestGrowthStock) – Domino’s Pizza Inc (DPZ.N: ) on
Tuesday reported quarterly profit that topped Wall Street’s
expectations, as its new pizza recipe attracted more U.S.
diners than expected, sending shares up as much as 6.7 percent
to a five-month high.

The company saw sales at restaurants open at least a year
in the United States surge 11.7 percent in the third quarter,
far above the 6.9 percent consensus among analysts.

Rival Yum Brands Inc (YUM.N: ) said earlier this month that
third-quarter same-restaurant sales for U.S. Pizza Hut outlets
were up 8 percent. [ID:nN05259362]

The U.S. delivery pizza category is growing again after
being hit by the recession, but competition is fierce, with a
focus on lower prices — including Domino’s offer of two medium
pizzas for $5.99 apiece, analysts said.

“It’s pretty clear their same-store sales number was very
strong domestically,” said Oppenheimer analyst Matt DiFrisco,
who has a “perform” rating on the stock. “The stock has had a
phenomenal run already. This delivered, no pun intended, on
what people had expected.”

Domino’s introduced its reformulated pizza in the United
States in December to address concerns about its taste. The new
pizza, which uses a different cheese blend and has a more
garlicky crust, has helped Domino’s shares nearly double since
the start of December.

Domino’s has not changed its pizza recipe outside the
United States.

“Domestically, we’ve made improvements that have resulted
in our growing faster than the vast majority of restaurants
despite the weak economic environment,” Chief Executive Patrick
Doyle told analysts on a conference call. “We see no reason to
think the fourth quarter won’t also result in positive sales.”

INTERNATIONAL PUSH

Domino’s third-quarter net income fell 6.9 percent to $16.6
million, or 27 cents a share, from $17.8 million, or 31 cents a
share, a year ago, when the pizza delivery company booked a
14-cent gain from early repayment of debt.

The profit per share was 2 cents better than what analysts
polled by Thomson Reuters I/B/E/S had expected.

Revenue at the Ann Arbor, Michigan-based company rose 14.8
percent to $347.4 million, topping the $335.9 million analysts
had expected.

In addition to the U.S. same-restaurant sales gain, aided
by the new pizza recipe, international results rose 7 percent.

“They’ve upgraded 80 percent of their menu, so it wasn’t
just the core pizza,” said Telsey Advisory Group analyst Tom
Forte. “The most significant was improving the quality of their
pizza. Then they’re devoting a record level of advertising
spend to support this upgraded menu.”

The company, with more than 9,100 restaurants globally,
also credited higher volumes and the addition of 76
international locations. The company said it is targeting
10,000 stores globally.

Domino’s noted higher commodity costs in the quarter,
including a 28.6 percent year-over-year increase for cheese,
which Telsey said accounts for 40 percent of costs.

Company executives said cheese prices will likely rise in
the fourth quarter from last year, but they have eased recently
and the industry may have seen the peak on such costs.

Domino’s shares rose as high as $15.61, and were still up
38 cents, or 2.6 percent, at $15.01 in Tuesday afternoon
trading on the New York Stock Exchange.

Telsey has a 12-month target for the stock price of $15 to
$17 a share.

Through Monday, shares in Domino’s since Dec. 1 had risen
89 percent versus a 28 percent rise in the Dow Jones U.S.
Restaurant and Bars index (.DJUSRU: ).
(Reporting by Ben Klayman in New York and Lisa Baertlein in
Los Angeles. Editing by Robert MacMillan and Gerald E.
McCormick)

UPDATE 4-Domino’s posts stronger-than-expected profit