UPDATE 3-Domino's Pizza profit down 55 pct, shares tumble

(Adds conference call, analyst comment, byline)

By Aarthi Sivaraman

NEW YORK, Oct 16 (Reuters) - Domino's Pizza Inc (DPZ.N) posted a 55 percent drop in third-quarter profit on Tuesday, hurt by cost pressures, weak consumer spending and higher interest expense, sending its shares down to their lowest level since October 2004.

Net income fell to $10.99 million, or 17 cents per share, in the quarter ended Sep. 9 from $24.5 million, or 39 cents per share, in the year-ago quarter.

Analysts, on average, were expecting 23 cents a share, according to Reuters Estimates.

"These are unprecedented times for us, both in terms of cost inflation and the fact that we're having a hard time growing our sales," Chief Executive David Brandon said during a conference call.

While international same-store sales rose 8.3 percent, higher labor, food and packaging costs along with weak consumer spending hurt domestic sales -- U.S. same-store sales at franchise stores fell 2 percent and rose a slight 0.8 percent at company-owned stores.

The price increase in the pizza category, which Brandon had forecast, was not implemented fast enough by its U.S. franchisees, who also faced lower store traffic, he said.

Friedman Billings Ramsey analyst Ashley Woodruff called the same-store sales numbers "disappointing."

"We believe the turnaround in comps has now been pushed out until the first quarter of 2008," Woodruff wrote in a note. She has an "outperform" rating on Domino's shares.

The pizza delivery chain's quarterly revenue rose 3.2 percent to $337.3 million.

The company also reported that its board and Brandon were negotiating the terms of a three-year employment agreement through 2010 for the CEO. Domino's also plans to come out with new ads next year.

Domino's shares were down $2.17, or 13.1 percent, at $14.39 after falling as low as $14.29 on the New York Stock Exchange.