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Cold Weather Means Hot Domino's Profit

Across Europe the weather is freezing and people are feeling the pinch from both the cold snap and the weak economy. And when you are not feeling great about life and it is very cold outside there is nothing better than sitting down in front of the TV and eating a pizza.

On Tuesday, Swiss food giant Nestle paid $3.7 billion for Kraft’s pizza business to capitalize on this trend but one US brand that is benefiting from this trend in the UK is Domino's . The independently-listed group, with 600 stores in Britain and Ireland, has had a fantastic 2009 culminating in Christmas sales rising by 8.4 percent year-on-year.

To help drive sales, CEO Chris Moore has been paying big money to be seen with the right people. As the sponsors of Britain’s Got Talent, the Simon Cowell vehicle that found Susan Boyle and the sister show of American Idol, Domino’s has been able to push its product at up to 20 million people.

Given those viewers are tuning in for the most popular show in the country for more than an hour at a time when most of us sit down to dinner the strategy has paid off handsomely. Shares are nearly 70 percent higher over the last 12 months and management, who are returning cash to shareholders via stock buybacks and higher dividends, are hoping for a very strong 2010.

Given the cold weather and the need for some comfort food in these difficult times it is hard to argue with Domino's management. Looking at the long term, though, you can see a couple of problems on the horizon. Any economic recovery could see more people leaving the house to eat out and the 2012 Olympics in London will be accompanied by a government initiative to get Britain eating healthier food and exercising more. If Britain’s Got Talent loses its appeal to UK viewers as well, Domino's management could have a hard time maintaining their stellar performance of recent years.