Domino’s management guidance on food costs, capex, and more



Management guidance

In the last part of this series, we learned that Domino’s Pizza, Inc.’s (DPZ) digital strategy has been critical for bringing in as much as 40% of sales in the U.S. In this part, we’ll look at management’s guidance about the future.

DPZ Effective Tax Rate 2014-10-17

Tax rate

Management anticipates the effective tax rate to be in the range of 37% to 38% for the “foreseeable future.” Corporate tax rates in the U.S. are high, and force some companies to move their headquarters to countries offering lower tax rates. Recently, Burger King Worldwide Inc. (BKW) made such a move when it acquired Tim Hortons Inc. (THI) in Canada. For more on this, read Burger King and Tim Horton’s investors react to acquisition news.

Yum! Brands, Inc. (YUM) had an effective tax rate of 22.7% in 3Q14, while McDonald’s Corporation (MCD) rate was 33.04% in 2Q14. McDonald’s is expected to release its earnings on October 21.

McDonald’s is a part of the Consumer Discretionary Select Sector SPDR Fund (XLY), an ETF investors may want to consider for broader exposure to the restaurant industry.

Other expenses

Domino’s management anticipates the inflation affecting cheese to continue until the end of this year, and indicated a 4% to 6% increase in overall market basket costs, year-over-year.

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The general and administrative, or G&A, expenses in the fourth quarter will come in higher due to a one-time charge of $6 million related to the replacement of the company’s corporate plan. Excluding this one-time charge, the company expects G&A expenses to be $6 million, or $3 million higher than 2013.

The purchase of a plane also raised the full-year capital expenditure estimates. These are now $20 million more than management’s previous estimates of between $35 million and $45 million.

With all these expenses, it’s important to discuss the company’s huge balance sheet debt. Read on to learn more.


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