Domino's Pizza, Inc. (DPZ) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong Q2 Performance: Demonstrated positive results with profitable order count growth in the US, improvement in international comps, and earnings in line with expectations.
• Annual Guidance on Track: Expectations for annual global retail sales growth of 7% or more and operating profit growth of 8% or more remain unchanged.
• Net Store Growth: US pipeline remains strong with an expectation of 175 or more net new stores annually through 2024-2028. China and India markets are on track for significant growth.
• Innovation with Intent: Launch of New York Style pizza as part of the mix-and-match offer and loyalty program to drive customer engagement and value.
• Operational Excellence: Improved delivery times by nearly 10% compared to Q2 2022, contributing to transaction growth.

Pessimistic Highlights

• International Net Store Growth Target Miss: Expected to fall below the net store growth target for international in 2024 by approximately 175 to 275 stores, primarily due to challenges faced by Domino's Pizza Enterprises (DPE).

Company Outlook

• Confident in Long-term Value Creation: Despite the shortfall in international net store growth, the company remains confident in its strategy and its ability to drive significant long-term value for shareholders.
• Expectations for Q3 and Q4: US comps to be above the 3% long-term guide, with Q3 expected to be slightly below Q2 due to one less Boost week, partially offset by a continued ramp in Uber.

Q & A Highlights

• Q: Can you provide more details on the loyalty program and expectations for the back half of the year and into 2025? (Dennis Geiger, UBS)

  A: Loyalty continues to perform well, driving new users and increasing the frequency of light users. It's a multi-year driver of comps, with significant growth in active members and redemptions. (Russell Weiner)

• Q: Can you elaborate on the dynamics causing the shortfall in unit growth from DPE and the confidence level in other master franchisees not facing similar issues? (Brian Bittner, Oppenheimer)

  A: The shortfall was due to unexpected increases in closures and slower openings by DPE, particularly in Japan and France. Confidence in the long-term outlook remains due to the robust growth opportunities in China and India. (Sandeep Reddy)

• Q: How confident are you in maintaining the annual targets given signs of consumer spending slowdown? (David Tarantino, Baird)

  A: Very confident, as the company has demonstrated growth in order counts across all segments despite the economic backdrop. (Russell Weiner)

• Q: What are your expectations for 3Q comps, and does it reflect current trends? (Andrew Charles, TD Cowen)

  A: Expect 3Q comps to be slightly below Q2 due to one less Boost week, with continued confidence in the business's momentum. (Sandeep Reddy)

• Q: Can you discuss the volatility in US sales trends and the outlook for Q4? (David Palmer, Evercore ISI)

  A: Did not observe volatility in sales trends, with steady performance driven by the loyalty program. Confident in achieving 3% or more comps in Q4. (Russell Weiner and Sandeep Reddy)

• Q: Can you discuss the value strategy and flexibility in promotional activity? (Lauren Silberman, Deutsche Bank)

  A: The strategy focuses on providing value for what customers want, not just low prices, driving order counts and loyalty. (Russell Weiner)

• Q: Can you provide insights into the incrementality of Uber sales and future plans with DoorDash? (Gregory Francfort, Guggenheim)

  A: Uber sales are in line with expectations, with a shift towards a high-low pricing strategy. The exclusivity with Uber ends in Q1, with future aggregator partnerships under consideration. (Russell Weiner)

• Q: Can you discuss the impact of store splits in the US and learnings from international markets? (John Ivankoe, JPMorgan)

  A: Store splits drive incremental carryout volume and improved delivery times, with strategic splits contributing to market share growth. Learnings from DPE's aggressive splitting in Japan are being considered. (Russell Weiner)

• Q: Can you clarify pricing versus cost inflation dynamics and the impact on franchisee profitability? (Sara Senatore, Bank of America)

  A: Despite modest price increases, franchisee profitability targets are on track, with balanced profit growth across the business. (Sandeep Reddy)

• Q: Can you provide more color on the challenges faced by DPE and confidence in other master franchisees? (Danilo Gargiulo, Bernstein)

  A: Challenges were unexpected and specific to DPE, with confidence in the growth opportunities and strategy in other markets. (Russell Weiner and Sandeep Reddy)

• Q: Can you discuss the contribution of the loyalty program to order counts and customer behavior? (Todd Brooks, The Benchmark Company)

  A: The loyalty program continues to drive frequency and engagement, with consistent trends in redemption at lower point levels. (Sandeep Reddy)

• Q: Can you share key takeaways from the worldwide rally and franchisee feedback? (Christine Cho, Goldman Sachs)

  A: The rally was highly successful, with franchisees leaving with clear strategic priorities and excitement for the future. (Russell Weiner)