DOMINOS PIZZA INC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Hungry for More Strategy:
  • M (Most delicious food): 2024 had two new product launches (New York style pizza and mac and cheese pasta). Plan to launch at least two new products in 2025. Enhanced food photography and e-commerce platform, with new US e-commerce platform to roll out in 2025.
  • O (Operational excellence): Rolled out More Delicious Operations program, improving delivery times by two minutes over two years. Rolled out 1,600 DJ dough stretching machines in US, enhancing product consistency and speed to competency for new team members.
  • R (Renowned value): Launched value initiatives like emergency pizza, national promotions, and Domino's rewards. Rewards program had 35.7 million active members in 2024, up 2.5 million from 2023. Entered aggregator channel with Uber, exiting 2024 at 3% of sales from this channel.
• International Focus: International business showed strong improvement, with Canada, India, UK, and Mexico seeing positive results from value initiatives, aggregator partnerships, and carryout/dine-in growth.

Segment Performance

• US: In 2024, US retail sales grew 5.3%. Q4 2024 total retail sales grew 2.3%, driven by net store growth and same-store sales of 0.4%. Carryout was up 3.2% and delivery down 1.4% in Q4. Delivery represented 46% of transactions and 57% of sales in 2024, while carryout was 54% of transactions and 43% of sales. The US added 84 net new stores in Q4 2024, reaching 7,014 system stores.
• International: Fourth quarter international retail sales grew 6.4% excluding foreign currency, driven by net store growth and same-store sales slightly ahead of expectations at 2.7%.

Guidance

• US: Expect US same-store sales growth of 3% or more in 2025, with impact from aggregators and loyalty programs, lower in first half than back half. Expect 175 plus net stores in US.
• International: Expect international same-store sales growth of 1%-2% in 2025, returning to normalized levels in 2026. Net store growth in international expected to be in line with 2024, with impacts from Domino's Pizza Enterprises (DPE) in Australia.
• Profits: Expect operating profit growth of approximately 8% excluding currency impact. G&A as percentage of retail sales expected to be ~2.4%. Increased technology fee by two cents per digital transaction.

Risks

• Macro and Competitive Pressures: Impact on US same-store sales, especially on delivery comps due to macro and competitive pressures affecting low-income customers.
• International Headwinds: Geopolitical issues and macroeconomic pressures in international markets, particularly from DPE's store closures in Japan.
• Supply Chain and Technology Rollout: Challenges in ramping up supply for DJ dough stretching machines and potential delays in e-commerce platform rollout affecting consumer experience.

Question and Answer

• Q: On 2025 guidance for US same-store sales, specifically lower first half vs back half and drivers like aggregators and loyalty.

A: Sandeep Reddy mentioned aggregators will have more impact in back half, and a slate of initiatives including two new products are part of the guide.

• Q: On international same-store sales guidance and changes since last quarter.

A: Russell Weiner said Q4 was strong, but international same-store sales guidance remains 1%-2% in 2025 due to tough macro environment.

• Q: On US unit growth target for 2025 and pipeline.

A: Sandeep Reddy said economics are best in class, demand for new units is strong, and pipeline is realistic despite hurricanes affecting 2024 net openings.