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Domino's Pizza Inc (DPZ) Q3 2024 Earnings Call Highlights: Strong US Growth Amid International ...

GuruFocus News
·4-min read

  • US Retail Sales Growth: 6.6% through the first three quarters of 2024.

  • US Same-Store Sales Growth: 3% in Q3 2024.

  • International Retail Sales Growth: 6.5% through the first three quarters of 2024.

  • International Same-Store Sales Growth: 0.8% in Q3 2024.

  • Income from Operations: Increased by 5.7% in Q3 2024, excluding foreign currency impact.

  • Operating Profit Growth (Year-to-Date): 8.6%, excluding foreign currency impact.

  • US Store Count: Added 24 net new stores, totaling 6,930 stores.

  • Uber Sales Mix: Grew to 2.7% of US sales in Q3 2024.

  • Share Repurchases: Approximately 443,000 shares repurchased at an average price of $429, totaling $190 million in Q3 2024.

Release Date: October 10, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Domino's Pizza Inc (NYSE:DPZ) reported a 6.6% increase in retail sales in the US, significantly outpacing the QSR pizza category's growth of less than 2%.

  • The company achieved its fourth consecutive quarter of same-store sales growth and positive order count growth, indicating strong operational performance.

  • Domino's Rewards program has been a key driver of US comp performance, successfully increasing active members and driving customer engagement.

  • The introduction of new products, such as Mac & Cheese, has been well-received, contributing to the company's strategy of innovation with intent.

  • Domino's Pizza Inc (NYSE:DPZ) has maintained a strong operating profit growth outlook of approximately 8%, excluding foreign exchange impacts, despite challenging macroeconomic conditions.

Negative Points

  • International retail sales growth of 6.5% is below Domino's historical performance and expectations, with macroeconomic pressures and geopolitical issues impacting results.

  • The company has revised its international same-store sales growth expectations to 1% to 2% for 2024 and 2025, indicating a slower recovery than anticipated.

  • Domino's Pizza Inc (NYSE:DPZ) has adjusted its global net store growth guidance downward, primarily due to challenges in international markets.

  • The company has experienced softness in the delivery segment, particularly among lower-income customers, due to increased competitive pressures.

  • Domino's Pizza Inc (NYSE:DPZ) faces challenges in maintaining its market share gains in a slower-growing pizza category, which is expanding at less than 2% annually.

Q & A Highlights

Q: Can you explain the changes in unit growth guidance and how you feel about ramping back towards targets in 2025 and beyond? A: Sandeep Reddy, Director: We've updated our global net store growth guidance to 800-850 from 825-925. This adjustment is primarily due to better visibility with DPE, allowing us to tighten the range. We continue to improve our visibility and will update expectations for 2025 as we move forward.

Q: Regarding the 2025 retail sales outlook, is the shortfall due to unit growth or comps? A: Sandeep Reddy, Director: The lower retail sales expectation for 2025 is driven by international same-store sales growth expectations of 1% to 2%, due to macro pressures. Unit growth shortfalls in 2024 will also impact 2025. The primary driver is the international business.

Q: How confident are you in achieving 3% US same-store sales growth in Q4? A: Russell Weiner, Independent Director: We are excited about our Q4 lineup, which includes Emergency Pizza 2.0, a pasta launch, and loyalty initiatives. We have a strong marketing program and are confident in our ability to drive growth.

Q: What is the status of your decision on DoorDash, and how does it compare to Uber? A: Russell Weiner, Independent Director: We plan to be on all aggregators, including DoorDash, which is larger than Uber. This will likely have a more significant impact on our business. We aim to exit the year with 3% sales through Uber.

Q: Can you elaborate on the weakness among lower-income customers and how Emergency Pizza resonated with different income cohorts? A: Russell Weiner, Independent Director: We saw some softness with lower-income customers on the delivery side. Emergency Pizza 2.0 aims to build on the success of the previous program, and we are optimistic about its impact.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.