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FINANCE
ANN ARBOR, Mich. (CAP) - Pizza delivery giant Domino's Pizza (NYSE:DPZ) has released its quarterly profit statement, which the company says beat analyst expectations by 77 percent. The pizza chain credits efforts to increase overall output while maintaining or cutting operating costs as the primary basis for the astonishing results.
"We're talking an immediate 25 percent increase in productivity following the implementation of our Ten-Slice Plan with barely a bump in manufacturing expenses," said Domino's Executive Vice President of Communications and Investor Relations Lynn Liddle. "It's clear this is an idea whose time has come and we are leading the way."
Industry analysts on average had predicted a profit of 15 cents per slice, but Domino's earnings report for the past three months rose to $17.8 million, or 27 cents per slice. Shares of YUM! Brands Inc. (NYSE:YUM) fell on word that the company's Pizza Hut subsidiary would not follow Domino's lead and would continue to cut their pizzas into eight slices for the foreseeable future.
"What this shows investors is that innovation is alive and well in the pizza industry," said Bloomberg analyst Murray Lynch. "Sure, everyone puts cheese in the crust, everyone has deep dish or thin crust or what have you, but right now, only Domino's has ten slices. They will be the guinea pig to see what the market can bear."
Domino's officials said the company is experiencing a slight increase in costs as it accounts for expenses to train employees on the new Ten Slice Plan. They said future training expenses will be incorporated into the regular operating budget as slicing classes and manuals are revamped for new hires.
Additionally, investors are keeping a close eye on two separate lawsuits facing the company. One by a former Domino's slicer who now works for Papa John's claims he came up with the idea for ten slices over two years ago but was told by his management that the concept "was not feasible" and was subsequently relieves of his duties.
The second lawsuit, filed by New England pizza chain Papa Gino's, claims Domino's is infringing on its trademark 12-slice rustic pizza, which the East Boston-based company says is the largest number of slices offered as a regular menu item by any domestic pizza franchise with at least five locations.
"Apples and oranges," said Domino's legal counsel Terence McCarthy of the Papa Gino's lawsuit. "Anyone can cut a tic tac toe pattern into a pizza and come up with more pieces, but that's not what the essence of pizza slicing is about.
"Besides, some of those rustic pizza corner pieces are so small, you can hardly call them slices," McCarthy added.
McCarthy said he believes the lawsuit is without merit and will be summarily dimissed. Papa Gino's made national headlines earlier this year when company scientists announced they had perfected the non-absorbent napkin.
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