Q2 2024 Earnings Summary
- Domino's is achieving positive order counts across both delivery and carryout channels, driven by the successful loyalty program and strategic innovations like the New York Style Pizza, leading to consistent sales growth despite broader consumer spending slowdown. , ,
- Strong international growth in key markets such as China and India, with franchisees increasing their store count outlooks, is expected to drive significant expansion and offset challenges faced by Domino's Pizza Enterprises (DPE).
- The partnership with UberEATS is performing as expected, on track to reach 3% of sales by year-end, representing a significant growth opportunity, with potential to expand to other aggregators like DoorDash in the future.
- International net store growth is expected to fall below the target by approximately 175 to 275 stores in 2024, primarily due to challenges faced by Domino's Pizza Enterprises (DPE), which may impact future growth projections.
- Higher labor expenses and investments in technology are limiting cost leverage, with operating income margins expected to be relatively flat in 2024 and down slightly in Q3. ,
- Concerns about potential sales volatility and slowing consumer spending may impact future same-store sales growth and the company's ability to meet its targets. ,
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Unit Growth Guidance
Q: Why did unit growth guidance change due to DPE?
A: The company adjusted its 2024 unit growth guidance mainly due to pressures at DPE, which is experiencing increased store closures in Japan and France. Despite this, the overall impact on operating income is immaterial, and they remain confident in their 7%+ GRS growth and 8%+ operating income growth targets. -
Confidence Amid Slowing Consumer Spending
Q: How can you maintain targets despite slowing consumer spending?
A: Despite signs of slower consumer spending, Domino's has seen order growth across delivery and carryout in every income cohort, including international markets. This steady performance underpins their confidence in meeting this year's targets. -
Uber Partnership Update
Q: What have you learned from the Uber partnership?
A: The Uber partnership is performing as expected, contributing about 1.9% of sales and tracking towards a 3% target for the year. They are considering whether to maintain exclusivity with Uber after Q1 or open up to other aggregators like DoorDash. -
Loyalty Program Success
Q: How is the new loyalty program performing?
A: The loyalty program is exceeding expectations, driving increased frequency among light users and engaging carryout customers. Orders with loyalty redemptions in carryout are twice as high as under the old program. This is viewed as a multiyear driver of comparable sales growth. -
Q3 and Q4 Comparable Sales
Q: What are your expectations for Q3 and Q4 comps?
A: Third-quarter comps are expected to be slightly below Q2 due to one less boost week, but they still anticipate positive transaction growth. For Q4, they expect comps to be above 3%, driven by continued benefits from the loyalty program and the ramp-up of Uber. -
Value Strategy and Promotions
Q: Can you increase promotional activity given industry value focus?
A: Domino's believes its value strategy is special and different from competitors. They focus on offering customers value on items they want across all platforms, not just individual discounted items. This consistent approach has built trusted value with customers. -
Impact of Store Splits
Q: How do store splits affect same-store sales and cannibalization?
A: Store splits have minimal negative impact due to the incremental carryout business they generate, with 80% of carryout volume being incremental. This strategy improves delivery times and drives more frequent customer orders.