DOMINO’S PIZZA $13.37 New York Symbol DPZ

DOMINO’S PIZZA $13.37 (New York symbol DPZ; SI Rating: Average)(734-930-3030; www.dominos.com; Shares outstanding: 59.6 million; Market cap: $796.9 million) is the world leader in pizza delivery. Through its primarily franchised system, Domino’s operates a network of 8,624 franchised and company-owned stores in the United States and in more than 55 countries. In the three months ended December 30, 2007, Domino’s revenues rose 2.5%, to $445.9 million from $435.3 million. International same-store sales rose 9.5%. That offset 1.1% lower sales at company owned U.S. locations. Despite the higher overall sales, earnings per share excluding one-time items fell 57.1%, to $0.21 from $0.49. The decline came from higher cheese, meat and wheat costs, plus increased transportation costs due to high fuel prices. As well, the company’s higher debt level, which rose to pay for a one time $13.50 a share dividend in early 2007, pushed up interest expense. Long-term debt now stands at a high $1.7 billion, or 213% of market cap. To improve results in the United States, Domino’s continues to implement improved marketing, technology and operating programs. The company also plans to put pressure on its weakest U.S. store operators, if their results don’t meet required franchise financial targets. Domino’s aims to force those operators to improve their business, or alternatively, push them to sell their stores to new operators. The company is also again targeting 30 minutes for delivery of a pizza. Domino’s was forced to drop its well-known “30 Minutes or Free” policy in 1993 due to concerns over drivers breaking traffic laws and putting themselves and others at risk while trying to fulfill the guarantee (although it’s still in effect in Mexico and India). However, the company is now running a “You Got 30 Minutes” campaign that shows customers with 30 minutes (maybe less, maybe more) of free time to do whatever they’d like before the Domino’s pizza arrives. Domino’s also has lots of room for expansion in international markets. International sales have increased for 56 consecutive quarters, and should continue to provide growth. The UK, Europe and Australia are showing steady sales increases. Domino’s already has 180 stores in 33 cities in India. It plans to expand that to 500 stores by 2010. Domino’s Pizza is still a buy.