Domino's Pizza, Inc. (DPI) is a global leader in the pizza industry, operating through its subsidiaries to manage retail sales, supply chain logistics, and franchise operations . The company sells a diverse menu that includes various pizza products, side items like bread, wings, chicken, pastas, sandwiches, dips, soft drinks, and desserts . Emphasizing technological innovation, Domino's generates a significant portion of its U.S. retail sales through digital channels .
- Supply Chain - Distributes food, equipment, and supplies to both Company-owned and franchised Domino's Pizza stores in the U.S. and Canada.
- U.S. Stores - Operates and franchises Domino's Pizza stores across the United States, offering a wide range of pizza and side items.
- International Franchise - Manages franchising operations in foreign markets, supporting international franchisees with brand and operational guidance.
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What went well
- Domino's is gaining market share through strong retail sales growth, driven by positive order counts for the fourth consecutive quarter and a focus on the carryout segment, which is larger than delivery in the U.S.
- Franchisees are experiencing best-in-class profitability and returns, enabling continued investment in store growth, which is critical for gaining share and improving efficiency in both carryout and delivery.
- The company's commitment to renowned value, disciplined pricing, and strategic partnerships with aggregators like Uber is attracting customers, driving incremental sales, and positioning Domino's well in the competitive landscape.
What went wrong
- Declining delivery transactions and headwinds in the first-party delivery channel: The company acknowledges that delivery transactions are turning negative and they are facing headwinds in the first-party channel, indicating challenges in their core delivery business.
- Intensifying competition leading to price wars and margin pressure: Executives note that competitors are aggressively promoting value deals, resulting in increased competition in the QSR pizza space (the "pizza wars"), which may pressure Domino's margins as they need to maintain value offerings to keep up.
- Limited ability to raise prices due to competitive environment and consumer sensitivity: The company indicates they have been highly disciplined on pricing, with minimal price increases (1.6% in the quarter), highlighting limited room to raise prices without risking customer loss, which could impact profitability.
Q&A Summary
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2025 Guidance Adjustment
Q: Why is 2025 retail sales outlook lowered?
A: The 2025 retail sales outlook has been adjusted due to lower international same-store sales expectations of 1% to 2%, down from initial targets, primarily because of macroeconomic pressures in international markets. Additionally, the reduced unit growth in 2024 will partially affect 2025's performance. The U.S. business remains on track. -
International Same-Store Sales
Q: What factors are affecting international same-store sales?
A: International same-store sales growth slowed, particularly in Europe and Asia, due to macroeconomic pressures impacting consumer spending. The company now expects international same-store sales growth of 1% to 2% for 2024 and 2025, below initial expectations set during Investor Day. , -
Unit Growth Guidance
Q: Has unit growth guidance changed?
A: Yes, global net store growth guidance for 2024 has been updated to 800 to 850 stores, down from the previous 825 to 925, mainly due to better visibility and updated expectations with Domino's Pizza Enterprises (DPE). The company remains committed to its plan of opening 175 stores annually in the U.S. , , -
U.S. Same-Store Sales Outlook
Q: Can you drive U.S. same-store sales growth in Q4 and 2025?
A: The company is confident in driving U.S. same-store sales growth of 3% or more for 2024 and expects to maintain this growth into 2025. Initiatives include the return of Emergency Pizza 2.0, a pasta launch, loyalty programs, and strong marketing efforts planned for Q4 and beyond. , -
Third-Party Aggregators Impact
Q: How will DoorDash impact sales mix and 2025 outlook?
A: Including DoorDash, which is larger than Uber, is expected to have a significant incremental impact on sales. The company's $1 billion target contemplates being on all aggregators, and they are pleased to have achieved a 2.7% sales mix through Uber Eats this quarter. The decision on DoorDash will be made at the end of Q1. -
Competitive Environment
Q: How is increased competition affecting lower-income consumers?
A: Increased promotional activity from competitors in August, including free delivery offers and similar promotions, has intensified competition. This, along with macroeconomic factors, has led to softness among lower-income customers on the delivery side. The company is responding by leaning into value and quality messaging. , , -
Market Share Growth
Q: Can you maintain market share gains in a slow-growing category?
A: Despite a category growth of around 2%, Domino's expects to grow U.S. retail sales by mid-single digits annually, driven by 3% same-store sales growth and opening 175 stores annually. This implies significant annual market share gains, consistent with past performance from 2015 to 2023. The company believes it can double its market share, currently just under 25% of U.S. pizza delivery. -
U.S. Unit Development
Q: Are you rethinking U.S. unit development plans due to delivery trends?
A: No, the company remains committed to opening 175 stores annually in the U.S. New stores drive incremental carryout volume and improve delivery efficiency, contributing to overall market share growth. Store growth is critical to gaining share, and significant progress is being made in this area. -
Loyalty and Marketing Initiatives
Q: What are the key initiatives for Q4 and 2025?
A: Upcoming initiatives include Emergency Pizza 2.0, a pasta launch, continued focus on loyalty programs, and other marketing efforts aligned with the Hungry for MORE strategy. The company plans to introduce two new products every year and will continue to emphasize value and creativity in its marketing. , -
Franchisee Profitability
Q: How are franchisee economics holding up?
A: Franchisee profitability is strong and expected to continue growing. The company ended last year with franchisee store profitability at $162,000, and remains committed to driving profit growth. Initiatives like the upcoming Economic Summit demonstrate ongoing collaboration to improve performance. , -
Impact of Macroeconomic Factors
Q: How are macro pressures influencing consumer behavior?
A: Macroeconomic factors like inflation and increased credit card debt are impacting lower-income consumers, leading to reduced spending, particularly on delivery. The company is addressing this by focusing on value offerings and expects consumers to respond positively over time. , , -
Carryout Business Focus
Q: Are you focusing more on carryout due to delivery softness?
A: The company is intensifying its focus on the carryout business, which is larger than delivery in the U.S. Leaning into carryout allows Domino's to compete effectively as other concepts move toward delivery. The carryout business offers significant growth opportunities domestically and internationally. -
Labor and Margins
Q: How is labor impacting margins?
A: Labor costs have stabilized as the company laps prior wage increases. While corporate store margins are improving, they are not necessarily indicative of franchisee performance due to varying local legislations. Nonetheless, the company is committed to driving profit growth for both corporate and franchisee stores. -
Product Innovation Pipeline
Q: Any plans to introduce stuffed crust pizza in the U.S.?
A: While stuffed crust pizza is available in Domino's markets globally, operational considerations in high-volume U.S. stores have so far prevented its launch domestically. The company is open to introducing it in the future if operational circumstances align. -
International Unit Growth
Q: Is unit growth outside DPE meeting expectations?
A: Excluding adjustments related to DPE, international unit growth is not materially different from expectations. DPE is the primary driver of reduced guidance, but the company continues to work closely with international franchisees to drive growth. -
Grocery Competition Impact
Q: Is grocery pizza affecting lower-income consumer behavior?
A: There is no significant impact from frozen pizza promotions on Domino's sales. Lower-income customers affected by macroeconomic factors may opt to eat at home, but this is not directly linked to increased competition from grocery pizza. -
Store-Level Economics
Q: How are you achieving operating profit growth with lower retail sales?
A: The company is finding cost efficiencies through procurement productivity, supply chain improvements, and phasing critical investments. Despite lower retail sales growth, they remain confident in achieving 8% operating profit growth in 2025 by managing costs effectively. -
Consumer Outlook for 2025
Q: What is the assumption on consumer behavior in 2025 guidance?
A: The company is not heavily relying on changes in consumer behavior for its 2025 guidance. Instead, it focuses on executing the Hungry for MORE strategy, regardless of the consumer environment, to drive growth. -
Franchisee Collaboration
Q: How are you influencing international franchisees to improve performance?
A: The company works closely with international franchisees, sharing successful U.S. strategies like value promotions and operational excellence. Examples include India and Mexico, which have leaned into value and seen positive results. Collaboration aims to drive same-store sales growth and expansion. -
Competitive Promotions
Q: Do you expect competitor promotions to intensify?
A: The company anticipates that competitors may continue to lean into value promotions to keep up with Domino's. The recent increase in competitive activity, referred to as the "pizza wars," is likely to persist as Domino's maintains its focus on value and marketing initiatives.
- With first-party delivery transactions turning negative and facing headwinds, are you reconsidering your focus on first-party delivery versus expanding carryout, especially if first-party delivery continues to weaken?
- Given the slowing delivery business and that new U.S. stores often open in existing delivery areas, are you re-evaluating your U.S. unit development plans, particularly the goal of opening around 175 stores annually?
- Despite the competitive environment intensifying with peers leaning into promotional and value efforts, do you expect this trend to further intensify through 2024 into 2025, and how might this impact your margins and strategic pricing decisions?
- Considering labor as a percentage of sales was favorable year-over-year for the first time in a while, can you explain what drove this shift, whether you expect it to continue, and if franchisees are experiencing similar benefits?
- With stuffed-crust pizza being a popular product globally and among competitors, what operational factors are preventing its launch in the U.S., and do you believe introducing it domestically would be well received by consumers?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: Q4 2024 and FY 2025
- Guidance:
- Global Retail Sales Growth: Approximately 6% for 2024; slightly below long-term guidance for 2025 .
- Operating Profit Growth: Approximately 8%, excluding foreign exchange impacts, for both 2024 and 2025 .
- U.S. Same-Store Sales Growth: 3% or more annually .
- International Same-Store Sales Growth: 1% to 2% for 2024 and 2025, with normalization expected in 2026 .
- Net Store Growth: 800 to 850 stores globally .
- Share Repurchases: 443,000 shares at an average price of $429, totaling $190 million .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024
- Guidance:
- Global Retail Sales Growth: 7% or more .
- Operating Profit Growth: 8% or more .
- Net Store Growth:
- U.S.: 175 or more net new stores annually .
- International: Below target by 175 to 275 stores in 2024 .
- Operating Income: 8% or more year-over-year increase, excluding foreign currency .
- Supply Chain Margins: Expansion expected; below midpoint of 1% to 3% food basket range .
- General and Administrative Expenses: Approximately 2.4% of global retail sales .
- Foreign Currency Impact: Approximately 1% of operating profit dollars .
- U.S. Same-Store Sales: 3% or more in Q3 and Q4 .
- Sales through Uber: 3% or more sales mix by year-end .
- International Comps: Accelerate to 3% or more in the back half of the year .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: Q2 2024 and FY 2024
- Guidance:
- Net Store Growth: 1,100 or more net new stores; 175 in the U.S. and 925 internationally .
- Operating Income: 8% or more year-over-year increase, excluding foreign currency .
- Operating Income Margins: Relatively flat compared to 2023 .
- General and Administrative Expenses: Approximately 2.4% of retail sales .
- Supply Chain Margins: Flat compared to prior year; 1% to 3% range .
- Global Retail Sales Growth: 7% or more, excluding foreign currency .
- U.S. Comparable Sales: 3% or more in each quarter .
- Sales through UberEATS: 3% or more sales mix by year-end .
- International Comparable Sales: Accelerate to 3% or more in the back half of the year .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Global Retail Sales Growth: 7% or more, excluding foreign currency .
- U.S. Comparable Sales: Above 3% long-term guide .
- Sales with Uber: 3% or more sales mix by year-end .
- Price Increase: Low single digits in the U.S.; higher in California .
- International Comparable Sales: Accelerate to 3% or more in the back half of the year .
- Net Store Growth: 1,100 or more globally; 175 in the U.S. and 925 internationally .
- Operating Income: 8% or more year-over-year increase, excluding foreign currency .
- Food Basket Costs: Up 1% to 3% .
- Supply Chain Margins: Flat for the year; increase in Q1 .
- General and Administrative Expenses: Approximately 2.4% of retail sales .
- Technology Fee and Advertising Fund: Technology fee lowered to $35.5; advertising fund contribution back to 6% .
- Franchisee Profitability: $170,000 or more per store .