Domino's Pizza not rattled by gas prices as profit rises

Domino's Pizza CEO Patrick Doyle told investors this morning that he was not concerned about the impact of gas prices on the company's profit, which rose 10.6 percent in the first quarter of 2011, according to an earnings report released today.

Customers, he said, have not pulled back on spending.

"We have not seen really any change from a consumer behavior standpoint, so that’s not showing up in our business — at least from where gas prices are today," he said on a conference call. "We haven’t seen that in the business."

Domino's reimburses delivery employees for mileage, so gas prices have an impact on that level. But that cost is funneled through delivery charges, which are controlled by franchisees.

The company has 427 company-owned U.S. stores and 4,482 franchised stores in the U.S., which means that franchisees would decide whether to increase delivery charges.

Doyle suggested that further increases in gas prices might lead to higher delivery charges at corporate stores. He rejected the idea of a fuel surcharge.

"We certainly don’t see doing a separate surcharge on top of the delivery charge. That’s what the delivery charge covers," he said. "It’s possible we could take an increase there if gas prices continue to move up from here, and that’s a likely place where we would do it."

Meanwhile, the verdict on the new core pizza recipe from Domino's is in, and the response is delectable.

Domino's reported strong sales results for the first quarter of 2011 — an indication that high interest in the company's new recipe during 2010 was not a fluke and that customers have embraced the new product.

Sales at Domino's U.S. stores open at least a year fell 1.4 percent in the first quarter, but that was a positive result, because the company spent significantly a year ago to promote its new recipe. At 11:52 a.m., company's stock (NYSE: DPZ) was up 7.6 percent to $20.66.

Domino's profit rose 10.6 percent to $27.1 million as sales at foreign stores open at least a year rose 8.3 percent. It was the 69th straight quarter Domino's posted same-store sales growth at its international stores, a consistently strong performing segment for the company. The company now has 4,470 foreign stores.

"I might sound like a broken record," Doyle told investors this morning in a conference call, but "I believe this quarter’s financial results proves once again that the Domino’s business model works."

Contrary to reports of a possibly steep rise in food prices this year, Doyle said Domino's believes it will be able to manage commodity costs. He said Domino's is projecting that its food expenses will rise 3 percent to 5 percent in 2011.

"We’re pretty comfortable with where commodities have been," he said. "It’s been in line with our expectations."

Doyle also said that about 25 percent of Domino's orders are placed online. He also hinted that the company would likely introduce a mobile app for ordering.

Without revealing details, he also said the company's revamped chicken products had been warmly received. He said most customers order the chicken as an "add-on" to other products.

"Overall we were very, very pleased with how chicken performed," Doyle said.

Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.