Domino's Pizza Inc (DPZ), who had 8,726 stores worldwide at the end of the 3rd quarter, posted a weaker-than-expected profit due to a sharp drop in U.S. sales, sending shares of the biggest independent U.S. pizza chain down 32 percent to an all-time low. In the fiscal third quarter that ended Sept. 7, Domino's net profit fell 8 percent to $10.1 million from $11 million a year earlier.
Domino's said it was looking for alternative sources of funding after Lehman Brothers filed for bankruptcy. It's ability to draw upon its variable funding notes diminished after Lehman Brothers declared bankruptcy, adding that it has no borrowings under its available variable funding notes as of Sept. 7. Lehman was the primary lender of the pizza chain's revolving-credit facility, providing $90 million of a $150 million revolving credit line. Should the existing agreement with Lehman become void, or if the chain cannot raise additional capital, the credit facility would fall to $60 million, with $38.3 million already committed.
Domino's additionally said it will save its cash and potentially make loans directly to its franchises. And although the pizza company doesn't need access to that cash for day-to-day operations, the fact that it's likely no longer available could hamper long term plans such as stock buybacks.
Like other pizza sellers, Domino's has faced weak domestic demand and higher costs for items like cheese and wheat. At the same time, U.S. consumers are more likely to make meals at home to save money due to unemployment, and higher food and fuel costs.
Revenues fell 4 percent to $323.6 million. Sales at U.S. restaurants open at least one year fell 6.1 percent, overshadowing international same-store sales, which rose 5.4 percent.
Domino's said the company may not be able to meet its 2008 growth plans for 200 to 250 stores, and that Domino's expects to close more than the 50 to 75 U.S. stores it had originally planned to shutter this year.
Earlier this year, Domino's assigned 'F' grades to 247 operators, who were put on notice to improve sales or have their operations taken over. Since then, 111 are trying to improve their stores, while 75 are in the midst of selling their operations. Some 47 have already been removed from the system and 14 more are still weighing their options.
On Tuesday, shares of Domino's sank 26%, or $2.55 to finish at $7.45.
Of course maybe it would help Dominoes business in the U.S. if they wouldn't resort to calling the phone number you give when you order pizza to tell you specials [The Consumerist], or leaving specials in Ziploc bags weighted down with rocks [The Consumerist], or maybe actually honoring their coupons [The Consumerist].+
I miss the Noid.