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Sunday March 1, 2015



Pizza Wars: Papa John's v. Domino's

Papa John's International, Inc. (PZZA) and Domino's Pizza, Inc. (DPZ) announced their 2013 fourth quarter results on Tuesday, February 25. Although both companies demonstrated strong financial momentum, Papa John's showed that it is gaining on its larger rival.

Domino's quarterly revenue increased 5% to $566.5 million while Papa John's revenue increased 5.6% to $387.9 million. In terms of comparable store sales, Domino's domestic and international same-store sales increased 3.7% and 7.0%, respectively. Papa John's also recorded international same-store sales of 7.0%, but beat Domino's on the domestic front with a same-store sales increase of 9.0%.

Domino's net income for the quarter was $44.7 million, an 18.9% increase over the $37.6 million reported during the same period last year. Papa John's recorded net income of $18.8 million, an increase of 8.3% over the $17.4 million reported during the comparable period in fiscal year 2012.

Domino's President and CEO, J. Patrick Doyle, commented on the company's results: "We made consistent progress in 2013 building a bigger and better Domino's brand. We had strong global momentum in sales, store growth and innovation. Consumers worldwide are redefining convenience – and we are meeting their evolving needs by pioneering technology in the restaurant industry."

Papa John's founder, Chairman and CEO, John Schnatter, had this to say about the company's results: "I'd like to congratulate our operators on delivering a great year for Papa John's, with several notable milestones and accomplishments including the opening of our 1,000th International restaurant and continued strong growth in sales, earnings and units."

The 2013 fourth quarter was further evidence that Papa John's is gaining on its much larger rival, Domino's Pizza. Papa John's opened 132 new restaurants during the quarter to bring its total count to 4,428 restaurants. Domino's, on the other hand, opened 348 restaurants to bring its total to 10,886. However, Papa John's must be pleased that its domestic same-store sales increase of 9.0% beat Domino's 3.7% domestic same-store sales increase.

Papa John's International, Inc. (PZZA) shares ended the week at $50.90 and Domino's Pizza, Inc. (DPZ) shares ended the week at $79.07.

SodaStream's Quarter Beats Estimates

SodaStream International Ltd. (SODA) announced its fourth quarter and full-year results on Wednesday, February 26. Although the company saw net income decrease, the results still managed to beat estimates.

Revenue for the fourth quarter was $168.1 million, a 26.4% increase over the comparable period's $132.9 million figure. Full-year revenue was $562.7 million, a 29% increase over fiscal year 2012's $436.3 million annual revenue.

SodaStream reported fourth quarter net income of $700,000, much lower than the $7.5 million reported during the same period last year. For the full-year, net income was $42.0 million, a 4.2% decrease from fiscal year 2012's $43.9 million figure.

Daniel Birnbaum, CEO of SodaStream, had this to say about the quarter, "While the fourth quarter proved to be more challenging than we expected there were several highlights, along with important lessons from the past year that give us confidence about the future. Our ability to grow revenue 29% to $563 million in 2013, including selling a record 4.4 million soda makers and increasing gas refill unit sales 30% to a record 21.5 million, underscores the high level of consumer interest and activity in home carbonation."

Mr. Birnbaum went on to say, "Our plan is to capitalize on our first mover advantage and leadership position by accelerating investments in brand building and demand creation in 2014 to capture a greater share of the global carbonated beverage market." Mr. Birnbaum's reference to SodaStream's "first mover advantage" was an allusion to a recent partnership between Green Mountain Coffee, maker of the Keurig, and Coca-Cola on the development of a new home carbonation machine. Many analysts believe the deal spells further trouble for SodaStream, which has seen its net income decline this past year. However, the company's fourth quarter results still beat expectations, resulting in a 6% increase in the company's stock price on Wednesday, February 26. In addition, the company was able to generate significant buzz and brand awareness during the recent SuperBowl with a popular ad featuring actress Scarlett Johannson.

SodaStream International Ltd. (SODA) shares ended the week at $39.48.

AMC Profits from High Ratings

AMC Networks Inc. (AMCX), owner of several cable TV channels, reported its fourth quarter and full-year results on Thursday, February 27. The company produced impressive financial results that reflect its strong lineup of TV programming.

AMC reported impressive double-digit fourth quarter and full-year revenue increases. Fourth quarter revenue increased 18.7% to $435 million and full-year revenue increased 17.7% to $1.592 billion.

Net income for the fourth quarter was $35 million compared to $15 million reported during the same period last year. For the full-year, net income increased 112% to $291 million compared to $137 million during 2012.

"In 2013, we delivered strong financial results, with double digit increases in both net revenues and adjusted operating cash flow driven by the success of our original programming at AMC, IFC, SundanceTV and WE tv," said President and CEO Josh Sapan. "AMC set ratings records for Breaking Bad and The Walking Dead, which continues to be the #1 show on all of television among adults 18-49."

AMC Networks continues to see incredible financial success, led by The Walking Dead, which drew 16 million viewers during its midseason premier in early February. The company reported that ad sales for its core channels increased 31% during the fourth quarter. With the departure of the popular hit Breaking Bad during 2013, the company faces the challenge of finding popular replacements. AMC announced that it had to write off $52 million with the cancellation of two shows during the quarter, Low Winter Sun and The Killing. The company hopes future programming set to air this year can fill the void and join the ranks of Breaking Bad and The Walking Dead as hits with viewers.

AMC Networks Inc. (AMCX) shares ended the week at $76.02.

The Dow started the week of 2/24 at 16,102 and closed at 16,322 on 2/28. The S&P 500 started the week at 1,837 and closed at 1,859. The NASDAQ started the week at 4,273 and closed at 4,308.

Treasuries Fall on Upbeat Economic Data

Treasury prices fell on Friday, February 28 for the first time in four days upon the release of better-than-expected economic indicators that signaled underlying strength in the U.S. economy. Still, a revised GDP report showed the U.S. economy expanded at a slower pace than originally reported.

A Chicago business barometer increased to 59.8 in February from 59.6 in January. February's reading surprised economists who had been expecting the barometer to fall to 56 during the month. A reading above 50 indicates growth.

In addition to the business barometer, the University of Michigan and Thomson Reuters consumer sentiment gauge increased to 81.6 in February, slightly higher than the 81.2 recorded for January. This number matched expectations as economists projected the February reading to be between 78.5 and 82.5.

Despite the positive business and consumer sentiment news, a revised GDP report showed the U.S. economy grew at a 2.4% rate in the fourth quarter of 2013 compared to the previously estimated 3.2%. The downward revision reflected less consumer spending than previously estimated. A Bloomberg survey of economists revealed that the revision was in line with expectations as they had expected a revision downward to 2.5%.

Even though the revised GDP report painted a less positive picture of the U.S. economy than initially believed, many analysts continue to have confidence in the economy. "I'm not sure [the downward revision in GDP] makes me any less optimistic about 2014," said James Bullard, President of the St. Louis Federal Reserve in a television interview on Friday.

Mr. Bullard's comments are echoed by other analysts who believe the soft economic growth of the past few months is the result of colder weather as opposed to a slowdown in the U.S. economy. As a result, the mildly encouraging economic reports on Friday caused investors to abandon the security of Treasuries, which pushed prices down and caused yields to rise.

The 10-year Treasury note yield finished the week of 2/24 at 2.66% while the 30-year Treasury note yield finished the week at 3.59%.

Interest Rates Increase Slightly

Freddie Mac released the results of its weekly Primary Mortgage Market Survey on Thursday, February 27. Sales of new homes exceeded expectations in January, which gave mortgage rates a slight boost for the week.

This week, the 15-year fixed rate mortgage averaged 3.39%, an increase from last week when it averaged 3.35%. One year ago, the 15-year fixed rate mortgage averaged 2.76%.

The 30-year fixed rate mortgage averaged 4.37% this week, an increase from last week when it averaged 4.33%. Last year at this time, the 30-year fixed rate mortgage averaged 3.51%.

Frank Nothaft, Vice President and Chief Economist at Freddie Mac, commented on this week's rates: "Mortgage rates edged up with new home sales exceeding expectations and rising to a seasonally adjusted pace of 468,000 units in January, the strongest annual rate since July 2008. The 9.6% increase in new home sales for January followed an upward revision of 13,000 units in December. The S&P/Case-Shiller 20-city composite house price index rose 13.4% over the 12-months ending in December 2013."

The money market fund finished the week of 2/24 at 0.4%. The 1-year CD finished at 0.7%.

Published February 28, 2014

Previous Articles

Coca-Cola Reports Disappointing Earnings

PepsiCo's Quarter Fails to Impress

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