DOMINO'S REPORTS 60% JUMP IN NET INCOME

Becomes Official Pizza of Nascar Racing

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CHICAGO (Adage.com) -- Pizza delivery chain Domino's yesterday reported a 60% jump in its annual net income, citing unit growth and cost cutting.

The Ann Arbor, Mich.-based chain reported $60.7 million in net income for 2002, up from $36.8 million the year before. Domino's nearly doubled its fourth-quarter net income to $23.1 million, a 90.3% increase over the $12.2 million for the same year-earlier quarter.

Promotions credited
Domino's credited its efforts to improve the quality of its product and its marketing promotions for boosting sales. Much of its marketing strategy has been dominated by promoting such add-on items as breadsticks, chicken tenders and baked dough balls, called Domino's Pizza Dots, that it launched in January with a full-scale advertising effort from WPP Group's J. Walter Thompson, New York.

As part of its marketing efforts, the company last month signed a multiyear agreement with Nascar to become the racing league's "official pizza" and broke a local-market TV spot featuring Daytona 500 winner Michael Waltrip.

In the spot, also from JWT, Mr. Waltrip delivers a pizza in his race car while his pit crew emerges in the family's kitchen to speedily set the table and seat the family -- the high chair of the family's youngest child is elevated on a pneumatic jack.

A Domino's spokesman wouldn't rule out a national buy for the comic ad.

Nascar-Domino's synergies
"Our primary focus is on the in-home entertainment aspect of Nascar vs. putting our logo on a car or sponsoring a driver," the spokesman said. "There are a lot of things that certainly are available to us should we want to make the investment in the future, but we're using this first year to see what kind of synergies Nascar and Domino's have with each other."

Domino's domestic same-store sales led the nation's pizza category, gaining 2.6% for the year, compared with share leader Yum Brand's Pizza Hut, which was flat, and No. 3 Papa John's International, which posted a 1.3% decline for the year. As a result, Domino's, the nation's second-largest pizza chain, said its domestic share of the pizza delivery segment went up by a full point to 19.9%, as measured by the NPD Group CREST tracking study.

Still, after starting off the first quarter of 2002 with sales at stores open a year up 7.6%, comparable sales have declined steadily, with flat sales during the fourth quarter.

"We're dealing with the same stuff everybody else is dealing with, a weakened economy, consumer uncertainty and rolling over strong comps," a Domino's spokesman said.

Bain Capital, which owns a 93% stake in Domino's Pizza, is said to be preparing the chain for a public offering and has been paying down debt. Executives wouldn't comment on the chain's plans to go public even though in October it hired an investor relations executive.

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