Domino's Pizza, Inc. (DPZ) Earnings

Management highlights

### Leadership Transition - Joe Jordan, 15-year Domino's veteran and current COO, will assume the role of CEO in October 2026, with outgoing CEO Russell Weiner transitioning to executive chairman. - Joe Jordan reaffirmed the company's core priorities: serving customers with high-quality food, strong value, and positive experience, supporting franchisees, and disciplined execution for long-term growth, with a focus on a seamless leadership transition. ### Core Business Strategy and Q2 Performance - Management emphasized Domino's long-term success formula: growing order counts paired with disciplined pricing, which has driven 240% store-level EBITDA growth and double-digit U.S. pizza market share gains since 2008. With a current 23% U.S. pizza category share, management sees significant long-term runway to reach the 40-50% share commanded by leading QSR brands in other categories. - Despite a flat industry-wide QSR order count environment in Q2 2026, Domino's saw meaningful order count growth across both delivery and carryout segments, driven by aggregator channel growth. Domino's is now the number one pizza player on both Uber Eats and DoorDash. - Q2 same-store sales missed expectations due to a lower-than-planned average ticket, which management attributes to internal execution: the newly launched Premium Series with sliced sauce did not resonate with customers as expected, and messaging was not sufficiently compelling. This miss was not caused by macroeconomic headwinds, which were already factored into plans. - The company revised its 2026 second-half marketing calendar, updating its popular "Best Deal Ever" promotion to add stuffed crust, which has already received positive customer response. A new, unique pizza innovation addressing an unmet consumer need will launch in Q3 2026, tested to be one of the best-tasting products in Domino's history. - Operational improvements: Domino's new back-of-house orchestration agent optimizes just-in-time pizza making for all orders (including direct and aggregator orders) to ensure customers receive hotter, fresher products, creating a competitive advantage across all ordering channels. ### Capital Allocation - Year-to-date through Q2 2026, Domino's repurchased ~632,000 shares for $231 million, with ~$1.23 billion remaining in the share repurchase authorization. Management remains committed to returning meaningful cash to shareholders aligned with its capital allocation priorities.

Guidance

- U.S. same-store sales growth guidance is maintained at low single digits, reflecting continued challenging macroeconomic and competitive conditions in the second half of 2026. - International same-store sales growth guidance is maintained at low single digits, which includes the expected benefit of the recently concluded World Cup soccer tournament. - U.S. net new store guidance is revised slightly downward to 175 net new stores from the prior guidance of 175+ net new stores. The adjustment reflects pipeline pressure from macroeconomic conditions and the impact of Q2's lower-than-expected franchisee profitability. International net new store guidance remains unchanged at approximately 800 net new stores for 2026. - Full-year 2026 global retail sales growth guidance remains mid-single digits. - Full-year 2026 operating income growth guidance (excluding foreign currency, re-franchising gains, and the corporate aircraft sale gain) remains mid to high single digits.

Segment performance

U.S. segment: Q2 2026 retail sales grew 1.9%, driven by 26 net new stores in the quarter. Same-store sales grew 0.1%, comprised of a strong order count increase offset by lower average ticket; pricing increased 0.2% for the quarter. Carryout same-store sales were up 1.1%, while delivery same-store sales were down 0.7%. The supply chain segment saw gross margin dollar growth fueled by strong U.S. order count growth. International segment: Excluding foreign currency impacts, Q2 2026 retail sales grew 4.1%, driven by 183 net new stores added in the quarter. Same-store sales declined 0.1%, primarily dragged down by ongoing turnaround efforts at Domino's Pizza Enterprises, plus macroeconomic and geopolitical uncertainty across global markets. Overall company: Income from operations increased 2.6% (excluding foreign currency and re-franchising gain impacts), driven by higher U.S. and international franchise royalties and fees, partially offset by higher general and administrative expenses from the company's biennial worldwide rally. Global retail sales grew 3% (excluding foreign currency) on 1,000 net new stores added over the past 12 months.

Risks & headwinds

- Ongoing macroeconomic uncertainty continues to pressure consumer discretionary spending and has created short-term pressure on the U.S. new store development pipeline by impacting franchisee profitability. - Heightened competitive pressure across both the pizza and broader QSR categories is expected to continue through the end of 2026. - Global macroeconomic and geopolitical uncertainty across international markets acts as an ongoing drag on international same-store sales performance. - Domino's Pizza Enterprises, the company's major international franchise partner, continues to experience same-store sales headwinds from its ongoing turnaround, which is actively prioritizing profit over short-term order counts and has dragged overall international comps in Q2. Independent pizza restaurants have recently benefited from a post-COVID shift back to dine-in experiences, though management notes Domino's has taken share from independents over the long term. - Product launches can underperform relative to internal testing, as seen with the Q2 2026 Premium Series launch which missed customer demand and ticket expectations, creating a short-term drag on profitability.

Analyst Q&A

• Q: Given Domino's strong Q2 order count growth, have the competitive pressures called out in the prior quarter started to dissipate? How should we interpret the comment that "competition has never been weaker"? /

  A: Competitive pressures across pizza and QSR remained throughout Q2 and are expected to continue through the end of the year. Domino's responded to ongoing competition by leaning into its value promotion strategy, upgrading the Best Deal Ever offer to include stuffed crust, with additional competitive moves planned for the second half. The comment about weaker competition refers to relative scale: Domino's now has a larger lead over its competitors than at any point in its history. Domino's greater scale allows lower franchisee supply chain costs and the largest ad budget in the industry, putting competitors with weaker scale and momentum at a structural disadvantage.

• Q: How do you balance profitability and growth in the third-party aggregator channel, and what is your strategy for ongoing expansion? /

  A: Domino's uses premium pricing on aggregator platforms to keep franchisees profit-neutral regardless of where customers order, and the 50% incrementality rate cited previously still holds. While Domino's is already the number one pizza player on both Uber and DoorDash, there is still significant runway to gain additional fair share in the channel, and management will prioritize protecting franchisee profitability as it grows. Domino's orchestration agent operational improvement works for both direct and aggregator orders, enabling Domino's to deliver hotter pizza than competitors, which creates a unique competitive advantage in the aggregator channel.

• Q: Why did the Premium Series launch underperform expectations relative to internal testing, and what learnings are being applied to the upcoming Q3 product launch? /

  A: Domino's has a strong track record of accurate pre-launch testing for new products and promotions, but the Premium Series failed to resonate with customers and messaging was not compelling enough, leading to the miss. Management has already corrected its messaging approach to return to the company's high standards. This corrected messaging approach is being applied to the upcoming Q3 new product launch, which management remains very excited about.

• Q: With the slight downward adjustment to 2026 U.S. unit growth, is there an opportunity to optimize existing store profitability by consolidating over-expanded markets instead of continuing to open new stores? /

  A: Domino's does not see a need to remap or consolidate existing U.S. stores, having only closed 6-7 U.S. stores over the past several years. Growth in order counts is the key driver of future store growth, and strong ongoing order growth means there is still plenty of room for profitable new store expansion. Carryout is ~80% incremental for new stores, and Domino's only holds ~20% share of the U.S. carryout market, so new store openings still deliver strong returns for franchisees.