Something to remember about DB's credentials

Submitted by phil on

A lot was and continues to be made about Dave Brandon's past experience as CEO of Domino's pizza.

DB and his proponents love using DB's tenure at Domino's as evidence that DB is more than qualified to run an athletic department.  Hey, if he can manage an enormous international company, the athletic department must be a cakewalk, right?

No doubt, CEO of a company like Domino's is no cakewalk.  But how do we know how well DB did in his role?  As head of the company, DB's role was to manage the company and increase shareholder value.  Put simply, a CEO's only job is to increase the stock price.  Thus, we can look at Domino's stock price as an idicator of DB's success as CEO. 

Dave Brandon began as CEO of Domino's in March of 1999.  There is no stock price information for this point in time as Domino's was a private company.  Domino's held an IPO on Tuesday, July 13th, 2004.  After opening at a price of $14 per share, the stock closed the day down 50 cents at $13.50 per share (source).  Expectations were for the stock to trade at $15 - $17 per share.  Without getting overly complicated, this IPO reflects poorly on the CEO, and frankly, a poor showing like this is fairly uncommon. 

Brandon continued in his role as CEO of Domino's until March 7th, 2010.  Brandon's departure was announced on January 5th, 2010 (source). Domino's shares closed at $8.76 per share on 1/5/2010.  

Thus, over the course of DB's tenure at Domino's, shareholder value decreased by over 35%.  You would probably have an easier time finding a doctor to sign off on Michigan's handling of Shane Morris than to find someone who would classify DB's time at Domino's as a "success".

These facts become even more concerning when you see what new leadership was able to do for shareholder value after DB's departure.  

click  for larger version

To put it simply, DPZ has been on an absolute tear since DB's departure.  The stock closed this Friday at $77.70 per share.  In less than 5 years, Domino's pizza is up an astounding 787%(!) since DB's departure was announced. 

Hopefully, this is proof that Dave Brandon's past experience is not all it's cracked up to be.  

Also, let us all hope for a similar tragectory for Michigan football upon Dave Brandon's departure.  

 

Go Blue!

 

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Dave Brandon

Chameleon Eyes

October 4th, 2014 at 9:46 AM ^

The MGoBlog difference. So you're saying buy stock in Michigan athletics after Dave gets canned?

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BlueCrowns

October 4th, 2014 at 9:46 AM ^

While your general point - that the stock indicator of Dominos is a good way to look at his tenure there - is probably pretty valid, I don't think your conclusion is. Can't really blame Brandon for that giant drop on the graph in 2007, since it wasn't really his fault that the economy crashed. 

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phil

October 4th, 2014 at 10:18 AM ^

I agree with you that the bear market beginning in 2008 did no favors to DB. 

Regardless of market conditions, you would still be very hardpressed to find many shareholders that would classify DB's tenure as a "success".  

Looking further into it, that giant drop occurred due to a special dividend of $13.50 which certainly makes DB's tenure look better. 

EDIT:

I tried to keep this post in simple terms that everyone could understand but I probably should have remembered that this is the MGoBoard.

At the end of the day, DPZ underperformed the S&P during DB's tenure and vastly outperformed the market after he left.

I think we can all agree that Michigan football is vastly underperforming the market (college football as a whole) under DB's tenure and hopefully there is an analagous situation after DB leaves.  

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KSmooth

October 4th, 2014 at 10:56 AM ^

There's a fairly simple explanation: price substitution: when incomes are tight, people substitute cheap items for more expensive (and higher quality) ones.  Your hours at the shop are down and you can't afford Buddy's or Shields so you go to Domino's instead.

There are other factors at play, but this is a big part of it.

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KSmooth

October 4th, 2014 at 10:31 AM ^

Possible but very speculative.  If Brandon had set the company up well for future profits, your sharper investors would have seen the changes and bought shares in anticipation of future profits, moving the price up toward the end of Brandon's tenure. I don't see that here.

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michgoblue

October 4th, 2014 at 9:49 AM ^

2008 was a stock market crash. Pretty big fact to omit. Average shares were down around 40%. Many stayed down the tough 2010 when he left. 2009 was the first year of the upward market move but even with that good year, many stocks remained down from their pre-crash levels. Since 2010, the entire market has gone up, not just dominos. In particular, 2012 and. 2013 were banner years. And, chain food restaurants have done particularly well in that time.

So, unless you are saying that Db caused the entire market to crash and that his departure from dominos was responsible for the ENTIRE market reaching record levels , this entire post is worthless. You are cherry picking numbers without context in an attempt to imply that DB was a bad CEO. Perhaps he was , perhaps he wasn't , but your post doesn't reflect on the issue

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Shop Smart Sho…

October 4th, 2014 at 10:14 AM ^

I seem to remember reading something at the time the market bottomed out that casual dining and fast food places would be a decent bet to at least hold steady.  The rationale being that people still had to eat, and that they have historically done okay during recessions.  

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MichiganG

October 4th, 2014 at 9:59 AM ^

Your conclusion is designed to align with the general sentiment around DB rather than actually objectively assessing his impact.  It's easy to say that a CEO is measured by the stock performance from the day they start through the day they end, but realistically a CEO should be putting in place strategies to ensure the long-term success of the organization.  An equally possible conclusion from this would be that DB set Domino's up for success which they're now enjoying.  I'm not saying that's the case, necessarily, but the point is that much more analysis is required to truly measure this.

But if the goal is just to be negative about DB, then I won't get in the way of that.

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phil

October 4th, 2014 at 10:04 AM ^

Ha, holy PR spin.

Seems a bit generous to me that DB gets credit for a company's performance 5 years after he left. 

Obviously this is a million times more complicated than just stock price, but I was just trying to point out that maybe DB's time at Domino's isn't as great as it initially sounded.  

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MichiganG

October 4th, 2014 at 10:24 AM ^

Where did I say DB gets credit for what happened last week?  But did that entire increase take place last week?  My point stands, which is that you shouldn't evaluate a CEO's performance on a single metric, which makes this analysis seem like a witch hunt rather than an objective measurement of performance.  Agree with you that it's a million times more complicated, which is why your conclusions are overly-simplistic.

And just for the record, I don't support DB at all; just think that picking and choosing information to support a point is not helpful, either.

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Papochronopolis

October 4th, 2014 at 9:57 AM ^

You are also missing the whole part where Dominos was cashed strapped and in dire straights when Brandon came in. This was before the company was public and he did a good job of turning the company around. The biggest question mark for Brandon is the level of involvement he had with the whole re-doing of the product itself. Sure most of it came through after he left but I have to imagine that he was a big part of creating that campaign (these things take years). Maybe he stepped down because he was not the person to implement the new campaign. He's still the Chairman of the Board. If he sucked as CEO there's no way that'd be the case... Now how this all correlates to AD success? Probably only a bit

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g_reaper3

October 4th, 2014 at 9:59 AM ^

Underperformed both the S & P 500 and Papa Johns during Brandon's tenure. That doesn't make him necessarily a bad CEO, but it certainly doesn't mean he is automatically qualified to be AD.

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Profwoot

October 4th, 2014 at 10:08 AM ^

2 major factors play into Domino's stock price:

1. The economy. It crashed while DB was CEO, and then recovered after he stepped down.

2. The revamp of their pizza, with the accompanying ad campaign, under DB.

Your "analysis" of his tenure takes neither of these into account, and therefore has no merit.

DB has done so much stupid shit that there's really no need to invent imaginary ones to criticize.

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phil

October 4th, 2014 at 10:23 AM ^

If you want to bring the economy and overall market into the discussion then you must also include that Domino's underperformed the market during the crash and has outperformed it during the current bull market.  

These underperforming and outperforming periods coincide very nicely with DB's time at Domino's. 

 

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phil

October 4th, 2014 at 10:29 AM ^

I'm not disagreeing with you, but do you have a source for DB being responsible for the revamped offering and makeover of the company?

I'm not claiming to be an expert of Domino's business strategies and absolutely realize that this issue is much more complicated than a simple internet post. 

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Profwoot

October 4th, 2014 at 10:49 AM ^

He was in charge of the pizza revamp and ad campaing in the same way he's currently responsible for Michigan's football problems -- he was in charge when it happened. I doubt he's the one who came up with the new dough recipe, if that's what you're asking, but he was responsible for it.

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MichiganG

October 4th, 2014 at 10:47 AM ^

STOP USING SHARE PRICE.  You acknowledged an enormous dividend in one of your posts, so at least calculate total returns.  It's not hard, there are even calculators.

For individual stocks: http://dqydj.net/dividend-reinvestment-calculator-for-any-stock-includi…

For S&P 500: http://dqydj.net/sp-500-return-calculator/

On total returns from the time Dominos went public to the time DB left, Dominos crushed the S&P500, with annualized returns of 10.45% compared to 0.73% for the S&P500.

 

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Bando Calrissian

October 4th, 2014 at 10:15 AM ^

Where's (is it) Seth with the long explanation about wheat futures and IPO strategies? We've apparently all got this wrong.

I'm less concerned about DB's performance at Domino's than the fact that this guy leveraged a job selling junk mail to a job selling junk pizza to a job selling junk football. That's the story here--not Domino's stock prices.

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mgobleu

October 4th, 2014 at 10:20 AM ^

bothers me the most about DB and what he's done is that he came into a situation that (besides RR and the football team,) wasn't broken and decided to start "fixing" things. What we needed in an AD was a manager. A maintainer. The particular "brand" of Michigan athletics was as strong as any school in the country and yet here he comes with his big giant noodle and starts stirring shit up as if it needed revitalization. All this combined with the fact that he's a bit much of an attention whore than I care for. I want to see a healthy athletic department; I don't care to see the athletic director every day.

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