Q3 2024 Earnings Summary
- 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.
- 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.
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Aggregator partnerships | 1.9% through Uber in Q2, aiming for 3%+ by year-end ; 1.4% in Q1 with 2/3 incremental ; Exclusivity launched in Q4. | 2.7% of U.S. sales from Uber, exploring DoorDash after exclusivity ends in Q1 2025. | Recurring with increasing optimism |
California AB 1228 | No mention in Q2 [No doc mention]. In Q1, wage increases forced higher prices. Q4 noted modest price hikes in CA to offset. | No mention in Q3 [No doc mention]. | Previously mentioned, not in current call |
Competition and promotional environment | Q2 stressed ongoing value approach. Q1 noted heavy 3P promotions, Domino’s protects top deals on its own channels. Q4 saw new product promos (Pan Pizza). | Domino’s in “pizza wars,” emphasizes value and disciplined pricing. | Recurring, sentiment remains positive for Domino’s |
DPE challenges | Q2 shortfall of 175–275 stores (Japan/France issues). Q1 general int’l pressure. Q4 saw France/Europe strain but pockets of improvement. | Same-store sales slowdown in Asia/Europe, lowered global net store guidance. | Recurring with ongoing challenges |
Emergency Pizza 2.0 | Not mentioned in Q2; Q1 covered original Emergency Pizza success ; no mention in Q4. | Touted as having “big shoes to fill,” featured in Q4 marketing lineup. | New version introduced, positive momentum |
Franchisee profitability | On track for ~$170K store profit in Q2, healthy U.S. economics. Q1 had strong profit dollar growth. Q4 showed a jump to $162K/store, new franchisees. | Remains best-in-class, expected to keep growing. | Recurring, sentiment very positive |
Hungry for MORE strategy | Q2 outlined pillars (Most Delicious Food, Operational Excellence, Renowned Value). Q1 detailed the strategy’s strong comp impact. Q4 emphasized 5-year growth plan. | Drives 4 straight quarters of order growth, central to Domino’s U.S. success. | Key framework, consistently positive |
International same-store sales | Q2 at 2.1%, broad-based improvement. Q1 at 0.9%, pressured in Europe/Middle East. Q4 at 0.1%, impacted by tensions. | 0.8% growth, slowed by macro/geopolitical issues. | Recurring, mixed due to environment |
International store growth and expansion | Q2 suspended guidance, citing DPE challenges. Q1 expected 925+ internationally. Q4 planned 2024 acceleration post-closures. | Revised net store range to 800–850; DPE performance a factor. | Recurring, downward revision now |
Labor cost and wage inflation | Q2 wage inflation still pressuring margins. Q1 raised CA prices to offset AB 1228. Q4 planned mid-single-digit wage inflation. | Stabilizing labor costs; first year-over-year improvement in a while. | Recurring, slightly improving sentiment |
Loyalty program | Q2: key comp driver, higher redemptions. Q1: boosted sales, new/lapsed users. Q4: 3M new members, integrated promos. | A multiyear driver, entering second year. | Recurring, highly positive |
Mac & Cheese | No mention in Q2, Q1, or Q4. | New product launched (5-Cheese, Spicy Buffalo), expands pasta lineup. | New in current period |
Market share gains | Q2: no explicit share discussion. Q1: regaining share after losses. Q4: expected to hold transaction volume. | Up 6.6% in retail sales vs. <2% category growth, capturing share. | Recurring with positive traction |
New York Style Pizza | Q2 had strong reception, included in loyalty. Q1 introduced as a permanent menu item. No Q4 mention. | Continues as part of innovation pipeline. | Recurring, continuing success |
Supply chain productivity improvements | Q2 favored by improving food basket. Q1 benefited from delayed investments and margin improvements. Q4 saw $23M supply chain profit growth from productivity. | Higher procurement productivity boosted operating income. | Recurring, remains positive |
U.S. same-store sales growth | Q2 at 4.8%, transaction-led. Q1 at 5.6%, loyalty and promos helped. Q4 at 2.8%, fueled by loyalty and “emergency pizza”. | 3% growth in Q3; 4 straight quarters of positive orders. | Recurring, stable improvement |
U.S. store growth guidance | Q2 reaffirms 175, targeting 7,000 total by year-end. Q1 similarly cites 175 with a clear pipeline. Q4 expects 175 in 2024 after adding 168 in 2023. | Staying with 175 net new stores per year, reaffirmed in Q3. | Recurring, unchanged |
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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.