Q1 2024 Domino's Pizza Inc Earnings Call
Operator: Thank you for standing by, and welcome to Domino's Pizza's first quarter 2024 earnings conference call. At this time, all participants are in listen only mode.
Thank you for standing by welcome to Domino's Pizza first quarter 2024 earnings conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your tell.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered, and you'd like to remove yourself from the queue, simply press star 11 again.
The phone if your question has been answered and you'd like to remove yourself from the queue simply press Star One one again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program. Mr. Greg Let me check Vice President of Investor Relations. Please go ahead, Sir good morning, everyone.
Operator: As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Mr. Greg Lemenchick, Vice President of Investor Relations. Please go ahead, sir.
Greg Lemenchick: Good morning, everyone. Thank you for joining us today for our first quarterly conference call. Today's call will begin with our Chief Executive Officer, Russell Weiner, followed by our Chief Financial Officer, Sandeep Reddy, and the call will conclude with a Q&A session. The forward-looking statements in this morning's earnings release and 10-Q, both of which are available on our IR website, also apply to our comments on the call today. However, actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in our filings with the S.A.
Speaker Change: Thank you for joining us today for our first quarter conference call today's call will begin with our Chief Executive Officer, Rob The Wiener followed by our Chief Financial Officer Sandeep.
Speaker Change: The call will conclude with a Q&A session.
Speaker Change: Forward looking statements in this morning's earnings release and 10-Q, both of which are available on our IR website also apply to our comments on the call today.
Speaker Change: Actual results or trends could differ materially from our forecast.
Speaker Change: More information please refer to the risk factors discussed in our filings with the SEC.
Greg Lemenchick: In addition, please refer to the 8K earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced on today's call. This morning's conference call is being webcast and is also being recorded for replay via our website. We want to do our best this morning to accommodate as many of your questions as time permits. As such, we encourage you to ask one question only. With that, I'd like to turn the call over to Russell.
Speaker Change: In addition, please refer to the 8-K earnings release.
Speaker Change: Disclosures and reconciliations of non-GAAP financial measures that may be referenced throughout todays call.
Speaker Change: This mornings conference call is being webcast and is also being recorded for replay via our website.
Speaker Change: We want to do our best this morning to accommodate as many of your questions as time permits as such we encourage you to ask one question only.
Speaker Change: That I would like to turn the call over to Russell.
Russell J. Weiner: Thanks, Greg. And good morning, everybody. Our Q1 results demonstrated that our Hungry for More strategy is delivering on its promise, driving more sales, more stores, and more profits. We drove strong comp performance in the U.S. that flowed through to the bottom line with double-digit profit growth. And our growth in the U.S. came through positive order counts across all income cohorts, in both our carry out and delivery sectors. We saw the largest growth in our lower income cohorts, who are undoubtedly benefiting from the renowned value that we're offering. I'd like to highlight our first quarter results through the lens of our M-O-R-E, Hungry for More pillar. As you know, M stands for the most delicious food.
Russell: Thanks, Greg and good morning, everybody. Our Q1 results demonstrated that are hungry for more strategy is delivering on its promise driving more sales more stores and more profit.
Russell: We drove strong comp performance in the U S that flowed through to the bottom line with double digit profit growth.
Russell: And our growth in the U S came through positive order counts across all income cohorts in both our Carryout and delivery segment.
Russell: We saw the largest growth in our lower income cohorts that are undoubtedly benefiting from the renowned value that we're offering.
Russell: I'd like to highlight our first quarter results through the lens of our MLR hungry for more pillars.
As you know M to answer most salacious food, we know we have the most delicious food in the industry and are focused on showcasing that with more mouthwatering food photography, and all of our marketing and sales channels.
Russell J. Weiner: We know we have the most delicious food in the industry and are focused on showcasing that with more mouthwatering food photography and all of our marketing and sales. We also ran a campaign that highlighted our pan- premium product that brought news to this cross type for the first time. And I'm excited to announce that our first product innovation of the year, New York style pizza, launches on air today. The idea for New York Style came from customers who prefer a thinner, more foldable crust than our traditional hand-tops.
Russell: We also ran a campaign that highlighted our pan pizza, a premium product that brought news to this cross type for the first time since 2014.
And I'm excited to announce that our first product innovation of the year newer style pizza launches on air today.
Russell: Idea for New York style came from customers, who prefer a thinner more foldable crust that our traditional hand Horst.
Russell J. Weiner: We believe that this new cross-style will drive incremental sales but will also drive deliciousness as the foldable crust lets us focus more on our incredible toppings, including a really unique blend of provolone cheese that comes on every New York style. Additionally, this crust option will be available as part of our mix and match offer, and Domino's Rewards members can redeem 60 points for a free medium two-topping New York-style pizza.
Russell: And we believe that this new cross style will drive incremental occasions.
Russell: We will also drive deliciousness as the Foldable crust, let's just focus more on our incredible toppings, including a really unique blend of provolone cheese that comes on every New York style Pizza.
Russell: Additionally, this crest option will be available as part of our mix and match offer.
Russell: And Domino's rewards members can redeem 60 points for free medium two topping New York style pizza as well.
Russell J. Weiner: This is another example of how innovation is designed to drive value and more customers into our loyalty program. The O in Hungry for More stands for Operational Access. This is how we'll deliver on our promise to have the most by consistently driving a great experience with our product. As I shared on our last earnings call in 2024, we're rolling out a new service program we're calling more delicious operations, a series of three product training sprints that focus on our dough, how we build and make our products, and how we cook.
Russell: This is another example of how innovation is designed to drive value and more customers into our loyalty platform.
Russell: Oh and hungry for more stands for operational excellence and this is how we will deliver on our promise to have the most delicious food by consistently driving a great experience with our products.
Russell: As I shared on our last earnings call in 2024, we're rolling out a new service program, we're calling more delicious operations a series of three product training sprints that focused on our DAU, how we build and make our products and how we cook.
Russell J. Weiner: In Q1, we embarked on our first sprint which focused on our dough and rolled this out across all 6,800 plus stores. We continue to see benefits from our service initiatives, and in Q1, we actually delivered more pizzas than we did in Q1 of last year at improved delivery times. I am just so proud of our opera.
In Q1, we embarked on our first Brent which focused on our Doe and roll this out across all 6800 plus stores in the U S.
We continue to see benefits from our service initiatives in Q1, we actually delivered more pizza than we did in Q1 of last year and improved delivery times I am just so proud of our operators.
Russell J. Weiner: Our third Hungry for a Pillar is R for Renowned Value. I want to expand on what renowned value means to us. It's not about just having the lowest price in the market, but providing value that's innovative and that's memorable. Renowned Value breaks through the sea of stainless steel discounts that you see in the marketplace.
Russell: Our third hungry for a pillar is our for now and value.
Speaker Change: I'll expand on what we're now value means to us at Domino's, it's not about just having the lowest priced in the market.
It's about providing value that's innovative and thats memorable.
Speaker Change: We're now value breaks through the sea of sameness discounts that you see in the marketplace.
Russell J. Weiner: Values if I won't get one free, renowned value reinvents this mechanic and creates emerging Emerging, Emergency pizza performed better than any buy one, get one free I've done in my career, and was a meaningful driver to our comps in both Q4 of 23 and in... And it not only drove increased orders but also the acquisition of members into our loyalty program. Domino's Rewards continues to perform extremely well and was the key driver of our strong The program is delivering on our objectives. Active member growth rates are up significantly since the launch of our new program.
Speaker Change: Values of buy one get one free.
Speaker Change: Right now in value reinvent this mechanic and creates emergency pizza.
Speaker Change: Emergency Pizza performed better than any buy one get one free I've done in my career.
Speaker Change: With a meaningful driver to our comps in both Q4 of 'twenty three and in Q1.
And it not only drove increased orders, but also the acquisition of members into our loyalty program.
Speaker Change: Domino's rewards continues to perform extremely well and was the key driver of our strong U S comp performance.
Speaker Change: The program is delivering on our objectives.
Speaker Change: Active member growth rates are up significantly since the launch of our new program from a percentage standpoint, our biggest increases are coming from new labs and light customers.
Russell J. Weiner: From a percentage standpoint, our biggest increases are coming from new labs and light customers. So we're bringing these new customers in. I'm particularly pleased with the increase in carryout customers made possible in part by our reduced $5 minimum spend for. Once customers become members, they're redeeming more points than ever before, and increases are being seen across all of our channels, delivery, and. Our new 20 and 40 point redemption tiers are doing exactly what we hoped.
Speaker Change: So we're bringing these new customers into the fold.
Speaker Change: I'm, particularly pleased with the increase in Carryout customers made possible in part by a reduced $5 minimum spend for earning point.
Speaker Change: Once customers become members, they're redeeming more than ever before and increases are being seen across all of our channels delivery and carryout.
Speaker Change: Our new 20% and 40 point redemption tiers are doing exactly what we hoped they are engaging more customers. These two tiers now combined for the majority of the redemptions in Domino's rewards.
Russell J. Weiner: They're engaging more customers. These two tiers now combine for the majority of the redemptions in Dallas, and the program has driven incremental profit dollars for franchises. So customers are getting more, and our franchisees have earned more profit. Truly a win-win.
Speaker Change: And the program has driven incremental profit dollars for franchisees.
Speaker Change: So customers are getting more than our franchisees have earned more profit truly a win win.
Russell J. Weiner: We believe Domino's rewards will continue to be a meaningful sales driver for us in 2024. National Promotions are another way we're driving right now. In Q1, we brought back our carryout special boost week for the first time since January 2020, and its performance exceeded our expectations.
Speaker Change: We believe Domino's rewards will continue to be a meaningful sales driver for us in 2024 and beyond.
National promotions or another way, we're driving we're now value.
Speaker Change: In Q1, we brought back our Carryout special boost week for the first time since January 2020.
Speaker Change: And this performance exceeded our expectations clear.
Speaker Change: Clearly customers want value and we're driving it profitably for our franchisees.
Speaker Change: Now as it relates to our promotional cadence in 2024, you can expect it to be consistent with what we did in 2019.
Russell J. Weiner: Clearly, customers want value, and we are driving it profitably for our franchises. Now, as it relates to our promotional cadence in 2024, you can expect it to be consistent with what we did in 2019, and part of that, you can expect around six.
Speaker Change: As part of that.
Speaker Change: You can expect around six boost weeks.
Speaker Change: As a reminder, these boost weeks are a proven customer acquisition tool that drives both short and long term benefits for our brand.
Speaker Change: And we're seeing the same commitment to providing we're now value internationally. Some of our best performing markets are getting this right.
Russell J. Weiner: As a reminder, these boost weeks are a proven customer acquisition tool that drives both short and long-term benefits for us, and we're seeing the same commitment to providing renowned value internationally. Some of our best performing markets are getting this right. As an example, our Master Franchisee in Mexico has run very successful boost recamps that have driven outstanding orders and sales. While providing renowned value through our own channels is one part of our Barbell strategy, tapping into the aggregator marketplace is the other. Our launch into the aggregator space remains on track to exit the year at 3% or more of sales.
As an example, our master franchisee in Mexico has run very successful boost campaigns that have driven outstanding order and sales growth.
Speaker Change: While providing renowned value through our own channels is one part of our barbell strategy tapping into the aggregated marketplaces the other.
Speaker Change: Our launch into the aggregator space remains on track to exit the year at 3% or more of sales coming through <unk>.
Speaker Change: Now that we're a quarter into our full launch I wanted to share a few insights on what we're seeing.
Speaker Change: <unk> has been in line with our expectations.
Speaker Change: In addition, we are.
Seeing a higher percentage of single user transactions on Uber than we've seen.
Speaker Change: <unk> on our own channels.
Speaker Change: Further this channel is becoming more promotional custer.
Speaker Change: Customer responses to deals are stronger than to everyday low prices.
Speaker Change: As a result, we are continuing to work to fine tune, our marketing spend and our offers to ensure that we are effectively driving this channel.
Speaker Change: We remain focused on driving profitable transactions through Hoover east, while ensuring that the best values for our customers remain on our own channels.
Russell J. Weiner: Now that we're a quarter into our full launch, I want to share a few insights on what we're seeing. Incrementality has been in line with our expectations. In addition, we're seeing a higher percentage of single user transactions on Uber than we've seen on our own channels.
Speaker Change: Everything we do at Domino's is enhanced by our best in class franchisees. The E and are hungry for more strategy will.
Speaker Change: We will be hosting thousands of franchisees for our worldwide rally in May where we plan to bring our hungry for more strategy to life across our global system.
I can't wait for that gathering is our franchisees are what makes domino's so special.
Russell J. Weiner: Further, this channel is becoming more promotional. Customer responses to deals are stronger than to everyday low prices. As a result, we are continuing to work to fine-tune our markings and our offers to ensure that we are effectively driving.
Speaker Change: They were the inspiration behind hungry for more.
Speaker Change: So to close I couldnt be more excited about 2024 and beyond for Domino's Pizza, our first quarter results clearly show that our strategy is resonating with customers.
Speaker Change: This gives me great confidence that we can deliver against our short and long term hungry for more goals and drive significant value creation for our shareholders with that I'll turn things over to Sandy.
Russell J. Weiner: We remain focused on driving profitable transactions through Uber while ensuring that the best values for our customers remain on our own channel. Everything we do at Domino's is enhanced by our best-in-class franchisees, the E, in our Hungry for More strategy. We'll be hosting thousands of franchisees for our worldwide rally in May, where we plan to bring our Hungry for More strategy to life across our global market. I can't wait for that gathering, as our franchisees are what makes Domino's. They were the inspiration behind how I did it.
Sandy: Thank you Russell and good morning, everyone.
Sandy: Our first quarter financial results demonstrate powerful model can be when we drive profitable transaction growth.
Sandy: The smart pricing, we took in 2022 and 2023.
Sandy: Has kept us at a great value to our customers in 2024, while being profitable for our franchisees.
Sandy: This has resulted in profit dollar growth versus 2023 for our U S franchisees so far this year.
Russell J. Weiner: So to close, I couldn't be more excited about 2024 and beyond for Domino's Pizza. Our first quarter results clearly show that our strategy is resonating with customers. This gives me great confidence that we can deliver against our short- and long-term hungry-for-more goals and drive significant value creation for our company. With that, I'll turn things over to Russell. Thank you, Russell, and good morning, everyone.
Sandy: We remain on track to achieve our target of $170000 average U S franchise store profit for 2024.
Sandy: Excluding the impact of foreign currency.
Sandy: Global retail sales grew seven 3% due to positive U S and international comps global net store growth.
Sandy: U S retail sales increased seven 8%.
Sandy: The national retail sales, excluding the impact of foreign currency grew six 8%.
Sandy: During Q1 same store sales for the U S. So meaningful increase of five 6%.
Sandeep Reddy: Our first quarter financial results demonstrate how powerful our model can be when we drive profitable transactions. The smart pricing we took in 2022 and 2023 has kept us at great value for our customers in 2024 while being profitable for our franchise. This has resulted in profit dollar growth versus 2023 for our US franchisees so far. We remain on track to achieve our target of $170,000 average U.S. franchise store profit for 2020, excluding the impact of foreign currency. Global retail sales grew 7.3% due to positive US and international comps and global net store growth. U.S. retail sales increased 7.8%, and international retail sales, excluding the impact of foreign currency, grew 6.8%.
Sandy: Our strong comps in the quarter for Carryout of nine 5% and delivery of two 9%.
Sandy: Were driven primarily by transaction growth.
Sandy: As Russell mentioned in his remarks, the increase in U S. Same store sales was driven by transaction growth from our new loyalty program.
Sandy: This was inclusive of a continued benefit from emergency pizza and.
And results that exceeded our expectations from the Carryout special boost week that'd be ramp.
Sandy: We also benefited from 0.9% of pricing.
Sandy: One 4% sales mix Uber.
Sandy: These still wins were partially offset by higher carrier mix, which carries a lower ticket and delivery.
Sandy: We assume evaluating how much of the one 4% sales mix coming from Uber is incremental.
Sandy: But everything we've seen so far would indicate that it's in line with our approximately two thirds estimate.
Sandy: Shifting to unit Count we added 20 net new stores in the U S.
Sandy: In line with our expectations, bringing our U S system store count to 68 74.
Sandy: Shifting to international where results were generally in line with our expectations same store sales, excluding foreign currency impact increased 049 percent in the first quarter.
Sandeep Reddy: During Q1, same-store sales for the U.S. saw a meaningful increase of $5.6. Our strong comps in the quarter for carryout of 9.5% and delivery of 2.9% were driven primarily by transactions. As Russell mentioned in his remarks, the increase in U.S. same-store sales was driven by transaction growth from our new loyalty program. This was inclusive of a continued benefit from emergency, and results that exceeded our expectations, from the Carriot Special Boost Week that we ran.
Sandy: Store comps increased by 144 net stores, which is an increase over the 160 opened in Q1 of 2023.
Sandy: Income from operations increased 19, 4% in Q1.
Sandy: Excluding the negative impact of foreign currency of $1 $4 million.
Sandy: This increase was primarily due to higher global franchise royalty revenues, resulting from global retail sales growth of seven 3%.
Sandy: As well as higher supply chain gross margins due to procurement productivity.
Sandy: The decrease in the cost of our food basket and slightly lower delivery cost.
Sandy: I also wanted to call out that our margin rate benefited by about 0.3% in Q1.
Sandeep Reddy: We also benefited from 0.9% of prices and a 1.4% sales mix from Uber. These tailwinds were partially offset by higher carryout, which carries a lower ticket than Deliveroo. We are still evaluating how much of the 1.4% sales mix coming from Uber is incremental. But everything we have seen so far would indicate that it's in line with our approximately two-thirds estimate. Shifting to unit count, we added 20 net new stores in the U.S.
Sandy: From the tech fee being at $39 five.
Sandy: The lower AD fund contribution rate of 575%.
Sandy: Now turning to our outlook, which remains in line with what we previously shared.
Sandy: 7% of all global retail sales growth, excluding the impact of foreign currency and we continue to expect the following.
Sandy: First.
Sandy: 2024 U S comps to be above the 3% plus long term guide as a result of our expected catalyst Uber.
Sandy: <unk> for the full year, and we expect comps to be 3% or more.
Sandy: Each quarter for the remainder of the year.
Sandeep Reddy: In line with our expectations, bringing our US system stroke count to 68. Shifting to international, where results were generally in line with our expectations, same-store sales, excluding foreign currency impact, increased 0.9% in the first quarter. Store counts increased by 144 net stores, which is an increase over the 106 we opened in Q1 of 2020. Income from operations increased 19.4% in Q1, excluding the negative impact of foreign currency of $1.4 million.
Sandy: Specific to Q2, we expect them to be slightly below Q1 on a one year basis.
Sandy: The emergency pizza promotion rolls off.
Sandy: Partially offset by a ramp dinuba.
You can expect a similar national promotions cadence to what we ran in Q1 in terms of our activity.
Sandy: Closely from the April Carryout special boost week that is now behind us.
Sandy: Second.
Sandy: Sales to increase throughout the year as marketing and awareness increases and we are expecting to exit the year with an overall sales mix of 3% or more.
Sandy: Third.
Sandy: International comps to remain soft in the first half of the year due to a continuation of the trends. We saw at the end of last year, but expect them to accelerate to 3% on more long term guidance in the back half of the year.
Sandeep Reddy: This increase was primarily due to higher Global Franchise Royalty revenue, resulting from global retail sales growth of 7.3% as well as higher supply chain gross margins due to procurement productivity, decreasing the cost of our food basket and slightly lower delivery costs. I also wanted to call out that our margin rate benefited by about 0.3% in Q1, from the tech fee being at $0.39.05 and the lower ad fund contribution rate of $5.75. Now, turning to our outlook, which remains in line with what we previously shared. 7% or more global retail sales growth, excluding the impact of foreign currency, and we continue to expect the following.
Sandy: Now shifting to net stores, where we continue to expect 1100 or more which will be driven by 175 in the U S and 995 internationally.
Sandy: We continue to expect an 8% or more euro your increase in operating income excluding the impact of foreign currency.
Sandy: To highlight some of the components, which remain unchanged.
Sandy: Expect operating income margins to be relatively flat compared to 2023.
Sandy: As a reminder, we are not expecting to see cost leverage in 2024 due to investments we are making in consumer technology store technology and supply chain capacity to support future sales growth in the U S.
Sandy: We are expecting our G&A as a percentage of retail sales to be approximately two 4%.
Sandy: This is inclusive of approximately $9 million and timing of G&A spend in Q2, driven by a worldwide rally, which takes place every two years.
Sandeep Reddy: First, 2024 US comp is expected to be about the 3% plus long-term guide as a result of the investments I expected in Uber and Loyalty for the full year. And we expect comps to be 3% or more in each quarter for the remainder of the year. Specific to Q2, we expect them to be slightly below Q1 on a one-year basis. As the emergency pizza promotion rolls off, partially offset by a ramp, you can expect a similar National Promotions cadence to what we ran in Q1 in terms of our activities, inclusive of the April carryout special boost week that is now behind us. Sales for Uber are expected to increase throughout the year as marketing and awareness increase, and we are expecting to exit the year with an overall sales mix of 3% or more.
Sandy: We are expecting supply chain margins to be roughly flat compared to the prior year.
Sandy: Incorporating an inflationary food basket for the rest of the year with a full year range of up 1% to 3%.
Sandy: Should our food basket pricing for the year moved to the lower end of our expectations, we may see modest leverage in operating and supply chain margins.
Speaker Change: Thank you we will now open the line for questions.
Speaker Change: Certainly one moment for our first question.
Speaker Change: Our first question comes from the line of Andrew Charles from TV Cowen Your question. Please.
Andrew Michael Charles: Great. Thank you.
Andrew Michael Charles: Question first on same store sales just <unk> five 6%, obviously, a very impressive number at this number or should we think it is the high watermark 124 U S. Same store sales you talked about <unk> <unk> sequentially moderate partially given the benefit of emergency pizza rolls off <unk> picks up but just curious do you have.
Sandeep Reddy: International comps are expected to remain soft in the first half of the year due to a continuation of the trends we saw at the end of last year, but we expect them to accelerate to our 3% or more long-term guidance in the back half of the year. Now, shifting to net stores, where we continue to expect $1,100 or more, which will be driven by $175 in the U.S. and $925 internationally. We continue to expect an 8% or more year-over-year increase in operating income, excluding the impact of foreign currency.
Andrew Michael Charles: This performance, though is broadly sustaining as we think about the remainder of 2024.
Speaker Change: Good morning, Andrew Thanks, Thanks for the call.
Speaker Change: Part of the reason for putting out 3% or more as part of our hungry for more algorithm is at.
Andrew Michael Charles: 3% for US is the floor, but we're going to do everything we can to beat that and deliver more every single quarter.
Speaker Change: So im not going to get into forward looking on the quarters, but what I will say that I really liked about this quarter is.
Sandeep Reddy: To highlight some of the components which remain unchanged, expect operating income margins to be relatively flat compared to 2020. As a reminder, we are not expecting to see cost leverage in 2024 due to the investments we are making in consumer technology, store technology, and supply chain capacity to support future sales growth. We are expecting our GNA as a percentage of retail sales to be approximately 2.4%. This is inclusive of approximately $9 million in timing of GNA spend in Q2, driven by a worldwide rally which takes place every two years. We are expecting supply chain margins to be roughly flat compared to the prior year.
Speaker Change: Two things I look at I look at results and I look at repeatability.
Speaker Change: And the run at all like you said were strong.
Speaker Change: Then look at it and say, Okay, where are the components that drove those results are those repeatable.
Speaker Change: And when you think about are hungry for more platform, we had product news.
Speaker Change: And first quarter, we've got actually our first new product of the year and second quarter.
Speaker Change: We talked about operational excellence, we delivered more pizza in Q1 than we did Q1 last year at a better delivery time.
<unk> value, we went to the second half of emergency Pizza in Q1, we had a carryout boost weekend, you've probably read we just put out a new renowned value promotion called Youtube we tap.
Speaker Change: And so and as Sandeep said earlier about the smart pricing, we took it that's part of it.
Operator: Incorporating an inflationary food basket for the rest of the year with a full year range of up 1% to 3%, should our food basket pricing for the year move to the lower end of our expectations, we may see modest leverage in operating and supply chain margins. Thank you. We will now open the line for questions. Please take a moment for our first question.
Speaker Change: Driving that consistent order kind of increase across every segment and consumer of our business and so while I can't get into the specifics what I can tell you is the repeatability of the MLR. Our formula is what we're going to be leaning into.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Dennis Geiger from UBS. Your question. Please.
Dennis Geiger: Great Thanks, guys and congrats on the quarter.
Andrew Michael Charles: Our first question comes from the line of Andrew Charles from TD Cowen. Your question, please. Great, thank you.
Dennis Geiger: Sandy I'm wondering if you could talk a little bit more about supply chain margin in sort of the overall operating margin strength that you saw in the quarter and perhaps anything more on the latest thoughts on full year. I know you gave color on the quarter you just talked about reiterating your thoughts for the full year anything more if you could kind of break down that procurement benefit perhaps.
Russell J. Weiner: Question first on same-store sales, just so you know, one Q is 5.6%, obviously a very impressive number. We think it has the high watermark for 2024 US same-store sales. You talked about how 2Q will sequentially moderate partially, given the benefit of emergency pizza rolls off, while Uber eats, you know, picks up. But, you know, just curious, do you think this performance, though, is broadly sustainable as we think about the remainder of 2024? Morning, Andrew.
Dennis Geiger: Maybe what you saw inflation deflation in the quarter itself for the supply chain.
Anything on that go forward procurement et cetera, as we think about the full year. Thank you.
Sandy: Thanks Dennis.
Sandy: And I think Thats a great question, because if you if you really go back to our fourth quarter call. Dennis we talked about our expectations for the first quarter ought to be really margin improvement and margin expansion, which we did see.
Russell J. Weiner: You know, part of the reasoning for putting out 3% or more, as far as we're hungry for more algorithms, is that, you know, 3% for us is the floor, but we're going to do everything we can, you know, to beat that and deliver more every single quarter. And so I'm not going to get into forward looking for the quarters.
Speaker Change: Directionally it was slightly more and I'll get to that in a second.
Speaker Change: I think overall when we.
Speaker Change: Look at the full year, our expectations really haven't changed.
Speaker Change: We were expecting to see.
Procurement productivity benefits for the whole year, and we were expecting to make investments that offset the procurement.
Russell J. Weiner: But what I will say that I really liked about this quarter is, you know, there are two things I look at. I look at results, and I look at repeatability. And the results, like you said, were strong. What I then look at is, OK, what were the components that drove those results, are those repeatable? And when you think about our Hungry for More platform, we had product news in the first quarter. We've got our first new product of the year in the second.
Speaker Change: The procurement productivity, what we did see specifically in Q1 is that while we got the procurement productivity.
Speaker Change: Some of the investments we are planning to make and supply chain capacity really pushed out into later in the year. So Q2 to Q4 gets a little bit more pressured as a result of it but the overall year doesn't change.
Speaker Change: And so directionally I think thats the way to think about supply chain margins and where do you expect to take that.
Speaker Change: Now when I talk about the full year expectations included in that was a timing factor on G&A specific to Q2, because we have our worldwide rally we had already messaged over the last call that we would expect to see some compression, but we've quantified it a little bit for you to help you with your modeling.
Russell J. Weiner: We talked about operational excellence. We delivered more pizzas in Q1 than we did in Q1 last year, at a better delivery time. Our renowned value, you know, we went the second half of emergency pizza in Q1, we had a carryout boost week, and you probably read we just put out a new renowned value promotion called U-Tip We-Tip. And so, as Sandeep said earlier about the smart pricing we took, that's part of what's driving the consistent order count increase across every segment and consumer of our business. And so, while I can't get into the specifics, what I can tell you is the repeatability of the MORRE formula is what we're going to be leaning on. Thank you.
Speaker Change: And other than that the back half really remains relatively similar to what we said in the fourth quarter call them. So.
Speaker Change: Not a very different picture on the P&L than what we saw back in February.
Speaker Change: Thank you and our.
Speaker Change: Next question comes from the line of Brian Bittner from Oppenheimer. Your question. Please.
Brian John Bittner: Thanks, Good morning.
Brian John Bittner: Your same store sales in the U S accelerated in the first quarter about 300 basis points from <unk> can you just talk about how much of that acceleration was traffic was all the acceleration traffic.
Dennis Geiger: And our next question comes from the line of Dennis Geiger from UBS. Your question, please. Great, thanks, guys.
Brian John Bittner: And it sounds like one of the biggest drivers of the strong comps are the rewards program. That's what you seem to be citing the most and I realize that <unk> may be a little lower than <unk>, but in general can you just unpack why you believe the rewards program and all the improvements that you've made there can be an ongoing driver.
Sandeep Reddy: And congrats on the quarter! Sandeep, wondering if you could talk a little bit more about supply chain margin and sort of the overall operating operating margin strength that you saw in the quarter and perhaps anything more on the latest thoughts on full year. You gave color on the quarter, you just talked about reiterating your thoughts for the full year. Anything more, if you could kind of break down that procurement benefit, perhaps, you know, exactly maybe what you saw inflation and deflation in the And, you know, anything on that going forward, procurement, etc., as we think about the full year. Thank you. Thanks, Dennis.
Brian John Bittner: For sales trends not just even in 2024, but how it can build on itself in 'twenty five.
Speaker Change: Sure Good morning, Brian.
Speaker Change: The Q1 results I think you nailed it what makes me so proud of the team.
Speaker Change: Is that they will order count trading there are account driven overall there are account driven on our delivery business on our carryout business across the different segments, We've got and I think thats something special in general let alone given the current environment for <unk>.
Speaker Change: Rewards certainly it was a big part of it and it will be a tailwind for us as we continue.
Sandeep Reddy: And I think that's a great question. Because if you really go back to our fourth quarter call, Dennis, we talked about our expectations for the first quarter to be really margin improvement and margin expansion, which we did. We were expecting to see procurement productivity benefits for the whole year, and we were expecting to make investments that offset procurement productivity. What we did see specifically in Q1 is that while we got procurement productivity...
Speaker Change: This year and for the next few years I mean, we saw this the first time, we launched a loyalty program. It was time to reinvent it and we did the nice thing about the reinvented program as it's driving.
Speaker Change: Activity with folks that maybe we didn't engage as much in the old program and so that carryout customer engagement.
Speaker Change: Engagement is much higher than it was before light users are much higher than they were before.
Speaker Change: And so that gives you a little bit of a sense of where that growth is coming from and I don't expect the tailwind from from loyalty to go away anytime soon.
Sandeep Reddy: Some of the investments we are planning to make in supply chain capacity really push out into later in the year, so Q2. And so directionally, I think that's the way to think about supply chain margins and where we expect to take them. Now, when I talk about the full-year expectations... Included in that was a timing factor on GNA specific to Q2 because we have our worldwide rally. All of the messages on the last call that we were expecting...
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Sara Senatore from Bank of America. Your question. Please.
Sara Harkavy Senatore: Thank you I wanted to ask about the promotional environment I guess, a couple of things. One is I know you mentioned that <unk> is more promotional.
Sara Harkavy Senatore: So I think the appeal for pizza had been that it was more margin neutral or maybe even accretive because of the.
Brian John Bittner: But we've quantified it a little bit for you to help you with your mind. And other than that, the back half really remains relatively similar to what we said in the fourth quarter call. Broadly, not a very different picture on the P&L than what we saw back in February. Thank you. And our next question comes from the line of Brian Bittner from Oppenheimer. Your question, please. Thanks. Good morning.
Sara Harkavy Senatore: The absence of deals I'm, just curious if that's still going to be the case and then as you think about the promotional cadence consistent with 2019 I think the implication was that.
Sara Harkavy Senatore: Promotional intensity is not particularly high relative to history, but 2019 was a bit of a slower comp year from Domino's and so I just wanted to kind of understand.
Russell J. Weiner: Your same store sales in the U.S. accelerated in the first quarter, about 300 basis points from 4Q. Can you just talk about how much of that acceleration was traffic? Was all the acceleration traffic?
How youre thinking about the implications.
Sara Harkavy Senatore: On.
Sara Harkavy Senatore: On same store sales from promotional intensity and the potential for competitors to match. Thank you.
Russell J. Weiner: And it sounds like one of the biggest drivers of the strong comps is the rewards program. That's what you seem to be citing the most. And I realize 2Q may be a little lower than 1Q, but in general, can you just unpack why you believe the rewards program and all the improvements that you've made there can be an ongoing driver for sales trends, not just in 2024 but how it can build on itself in 25. Thanks. Sure. Good morning, Brian.
Speaker Change: Thanks, Sara I'll try to get to each piece of that unpack it a little bit I think what we talked about that we're seeing on three P is definitely at a high low value driven.
Sara Harkavy Senatore: Business and what we're doing is we're kind of adjusting accordingly to the important thing to remember is the best prices for consumers and our loyalty program, we're always going to be or on our own channels.
Russell J. Weiner: The Q1 results, I think you nailed it. What makes me so proud of the team? is that they were order count-driven. They were order count-driven overall, they were order count-driven in our delivery business, in our carry-out business, across the different segments we've got. And I think that's something special in general, let alone, you know, given the current environment, you know, for 2SR. Rewards certainly were a big part of it and will be a tailwind for us as we continue this year and for the next few years.
Sara Harkavy Senatore: But it's interesting, though when when you look at what's going on in <unk> I think that.
Sara Harkavy Senatore: Really exacerbates the difference between what we're doing on our own channels.
Sara Harkavy Senatore: So there its price.
Sara Harkavy Senatore: It's this percent off for you given this this away free up and down what we're doing out there which is why I think.
Sara Harkavy Senatore: It feels like and you said that it feels like they're more promotions out there.
The difference between value and renown value.
Sara Harkavy Senatore: I talked to the team a lot when we think about what we are now in value means it means bringing the talk to value. So.
Russell J. Weiner: I mean, we saw this the first time we launched a loyalty program; it was time to reinvent it, and we did. The nice thing about the reinvented program is driving activity with folks that maybe we didn't engage as much in the old program. And so the carryout customer engagement is much higher than it was before. Light users are much higher than they were before.
Sara Harkavy Senatore: Let's talk value versus value and.
Sara Harkavy Senatore: So the promotions may feel that we're doing out there may be feeling like there. The activity has increased I think what has increased is just the power.
Sara Harkavy Senatore: All of them and like I said.
Sara Harkavy Senatore: Bogo versus a buy one.
Sara Harkavy Senatore: But versus emergency pizza or.
Sara Harkavy Senatore: $3 bounce back.
Sara Harkavy Senatore: For purchase in a week.
Sara Harkavy Senatore: Versus Youtube we tip.
Russell J. Weiner: And so that gives you a little bit of a sense of where that growth is coming from. And I don't expect the tailwind from loyalty to go away. Thank you. And our next question comes from the line of Sara Senatore from Bank of America. Your question, please? particularly high relative to history, but 2019 was a bit of a slower comp year for Domino's, and so I just wanted to kind of understand how you're thinking about the implications on Timster sales from promotional intensity and the potential for, you know, competitors to match. Thank you. Thanks, Sara. I'll try to get to each piece of that unpacked a little bit.
Speaker Change: They just feel more powerful because the talk value was there and I think that's a great just to position understanding how we're going to break out from both <unk> and the rest of <unk> with the promotions that we do.
Speaker Change: And I'm, just going to add some things because I think.
That's what we're talking about promotion of the subtext is what's happening to profitability.
Speaker Change: What is great for us as a profit dollar growth continues to grow as we expected. It to we are on track to the $170000 or more for the year.
Speaker Change: And we are doing exactly what we hoped for.
Speaker Change: On the last call you asked about profit dollar growth versus margin expansion, even on the corporate stores. We saw a very healthy profit dollar growth and we did see a bit of margin expansion, but we're not solving for margin expansion. We're solving for profit dollar growth and and I think what we're seeing is very healthy the way all this explains where the P&L.
Speaker Change: Yes.
Sara Harkavy Senatore: I think, you know, what we talked about that we're seeing on 3P is definitely a high-low value-driven business, and what we're doing is we're kind of adjusting accordingly. The important thing to remember is the best prices for consumers and our loyalty program are always going to be on our own channels. But it's interesting, though, when you look at what's going on in 3P, I think that really exacerbates the difference between what we're doing on our own channels.
Speaker Change: Thank you and our next question comes from the line of David Palmer from Evercore ISI.
David Sterling Palmer: Thanks, Good morning, I was hoping maybe we could drill down into just the labor situation for Domino's as you see it across not just your company stores and supply chain, but also the franchisees any metrics you can share that could speak to how.
David Sterling Palmer: Labor availability is impacting the business both sales and margins.
Russell J. Weiner: So there's price, it's you know, it's this percent off, you're giving this away free, up and down. What we're doing out there, which is why I think, You know, it feels like, and you said this, you know, it feels like we're getting more promotions out there. It's the difference between value and renown value.
Speaker Change: Maybe I'll talk Big picture and Sandeep you can you can talk on the margin level.
David.
Speaker Change: The biggest indicator to me about both labor availability and frankly, the improvements that we're driving operationally is the fact that we delivered more orders in Q1 than we did last year at better delivery times and so if labor was an issue we wouldn't be able to do that and obviously the flow through to prop.
Russell J. Weiner: I talk to the team a lot, and when we think about what renown value means, bringing the talk to value. So it's top value versus value. And so the promotions may feel that we're doing out there may feel like the activity's increased. I think what has increased is just their power. And like I said, a BOGO versus a buy one versus emergency pizza or a $3 bounce back for purchase in a week versus uTip, and weTip. They just feel more powerful because the talking value is there.
Speaker Change: We believe.
Speaker Change: Sandeep spoke about that a little bit.
Speaker Change: So that to me should be a takeaway that.
Speaker Change: That is working right now.
Sandeep: Yes, I think.
Sandeep: Russell is exactly right I think accessing labor has been.
Sandeep: <unk> at all as we've moved through the year.
Sandeep: What I do think is reality and we talked about this on the last call as well as there is some wage pressure in the year with some minimum wage increases statutory increases.
Sandeep: That will impact the franchisee P&L Corp.
Sandeep: Corporate store P&L.
Sandeep: But I think specifically, California is a good example, where we had 228.
Sandeep Reddy: And I think that's a great juxtaposition, understanding how we're gonna break out from both 3P and the rest of QSR with the promotion. And I'm just going to add something, Sara, because it is. Sometimes when we talk about promotion, the subject is what's happening to profit. What is great for us is that our profit-dollar growth continues to grow as we expected it to. We are on track to about $170,000 or more for the year, and we are doing exactly what we hoped for. And I think on the last call, you asked about profit-dollar growth versus margin expansion. Even at the corporate stores, we saw very healthy profit dollar growth.
Sandeep: Reach increases.
Sandeep: So we essentially would have been two.
Sandeep: We have to increase our prices in California to address the wage increases that you saw over there.
Sandeep: This increase was probably in the high single digits.
Sandeep: Modified if we need to actually.
Sandeep: Adjusted what the competitors are doing but overall, we're solving for profit dollar growth. That's what we are always solving for.
Sandeep: And we are looking to us to protect our franchisee profitability in California and throughout the system and so margin percentages are good to look at and maintain good flow through quite resolving for dollar growth.
CX marketer and we need to follow up with that there are two there are two <unk>.
Sandeep: <unk> abilities that we care about at Domino's Pizza, because we know if we balance those are profit followed then certainly the franchisee profitability is a lot of them, but the other is the profitability.
Sandeep: For every American out there every pizza buying citizen.
Sandeep Reddy: And we did see a bit of margin expansion, but we're not solving for margin expansion; we're solving for profit dollar growth. And, and I think what we're seeing is very healthy the way all, Thank you. And our next question comes from the line of David Palmer from Evercore ISI. Thanks, good morning.
Sandeep: All over the world.
Sandeep: And that is where I think our record of smart pricing, which has been call. It 15 years of doing so.
Sandeep: It has proved out.
Sandeep: We had the $5 99 mix and match offer for 12 years.
Profits went up order count went up.
We took smart pricing and smart pricing is based on a lots of analytics around what the competition is doing what's going on with <unk>.
David Sterling Palmer: I was hoping maybe we could drill down into just the labor situation for Domino's as you see it across not just your company stores and supply chain but also the franchisees. You know, any metrics you can share that could speak to how labor availability is impacting the business, both sales and margins? Thanks. Maybe I'll throw a big picture at Sandeep.
In consumers' wallets, and we took pricing and thats pretty much the majority of at least promotional pricing, we've taken already and Youre seeing how that's translated into order count growth and the way I think about it is every year.
Sandeep: Should the analytics. They say we can stay with 699 as an example, we get more and more in value and so when you balance consumer profitability on franchisee profitability you get Q1.
Russell J. Weiner: Talk on the Margin. I mean, David, the biggest indicator to me about both labor availability and, frankly, the improvements that we're driving operationally is the fact that we delivered more orders in Q1 than we did last year, at better delivery times. And so if labor was an issue, you know, we wouldn't be able to do that.
Sandeep: Okay.
Sandeep: Yes.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line.
Speaker Change: Silbermann from Deutsche Bank Your question. Please.
Silbermann: Thanks, so much congrats on the quarter you talked about the strong performance across income cohort can you expand on what youre seeing with the consumer and whether there are any observable differences in how consumers.
Russell J. Weiner: And obviously, the flow through the profitability front, Sandeep spoke about that a little bit. And so that, to me, should be a takeaway that that is working. Yeah, and I think Russell's exactly right. I think accessing labor has not been a problem at all. Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com. But I think specifically California is a good example, right, where we have had to increase our prices in California to address the rate of inflation. Please see the video description for a list of ingredients.
Silbermann: <unk> worth or using the brand and then any changes in consumer behavior scientists began within each channel. Thank you.
Silbermann: Sure.
Silbermann: We talked I think Laura in Q4, or even maybe in Q3, a little bit about what we were we thought was coming in 2024 and that is coming to fruition.
Speaker Change: Traffic is hard to come by orders are hard to come by in the <unk> I think youre going to see that continue throughout the year I don't think thats going to be the case at Domino's because of what we talked about before and the traffic doesn't just come it becomes.
Speaker Change: I said before results are.
Important if they are repeatable and they're repeatable, if theres a formula and essentially.
Speaker Change: Our pricing is stable and right our promotional context, our promotions have come back Carryout special and we brought that back.
Sandeep Reddy: Adjust to what the competitors are doing. But overall, we're solving for profit dollar growth. That's what we are always... And we are looking to protect that franchisee. So margin percentages are good to look at, and the ex-marketer in me needs to follow up with that, you know, there are two profitabilities that we care about, you know, at Domino's Pizza. Because we know if we balance those, our profit follows, and certainly the franchisee profitability is one of them, but the other is the profitability for every American out there, every pizza-buying citizen, you know, kind of all over the world I mean, we had the $599 mix and match offer for 12 years.
Speaker Change: Our new products.
Speaker Change: I think the key thing, though when you. When you are talking about why is every income cohort engaging in domino's with positive order count is a big piece of that is the new loyalty program.
Speaker Change: We specifically designed it to tap into.
Speaker Change: Consumers that we hadn't done before so reducing the purchase from $10 to $5. While all of a sudden there is a much more compelling program for carryout customers and customers in general who.
Speaker Change: Don't want to spend a lot of body at five bucks they get points.
Speaker Change: And the other thing is the 20% and 40 point levels, adding those those redemption levels.
Speaker Change: Our loyalty program has been key in driving frequency among.
Speaker Change: Kind of a lower income and lower frequency customers. The amazing thing to maybe think about the old program, which was only 60 points for a medium two topping pizza.
Russell J. Weiner: Profits went up, order counts went up. We took Smart Pricing, and Smart Pricing is based on lots of analytics around what the competition's doing, what's going on in consumers' wallets. And we took pricing, and pretty much the majority, at least promotional pricing, we took it already, and you're seeing how that's translated into order counts. And the way I think about it is every year.
Our.
Speaker Change: New program, the 20 point in a $40 level actually combined are higher than the $60 level and so that gives you a sense of.
Speaker Change: Why we're breaking through in every cohort across delivery and Carryout.
Okay.
Speaker Change: Thank you and our next question comes from the line of Daniel Guardiola from Baird.
Daniel Guardiola: Bernstein Your question please.
Daniel Guardiola: Congrats again on the quarter.
Daniel Guardiola: I was wondering if you can elaborate on what is causing the international market to have a little bit more compressed growth this quarter, which again was in line with your previous expectations.
Russell J. Weiner: Should the analytics say we can stay with $6.99 as an example? We get more and more in value. And so when you balance Consumer Profitability and Franchisee Profitability, you get Q1. Thank you.
Daniel Guardiola: Particularly if you can elaborate.
Daniel Guardiola: Being able to estimate how the pressure from the pension and the middle East asking you specifically.
Daniel Guardiola: More broadly if you can take any lessons from the domestic markets outgrowing surpassed and you can trust them older to the international market. Thank you.
Lauren Danielle Silberman: And our next question comes from the line of Laura Silberman from Deutsche Bank. Your question, please. Thanks so much.
Daniel Guardiola: Yeah.
Speaker Change: Thanks, well you both asked and answered the question so great job.
Speaker Change: Yes look at Q Q1 comps were in line with our expectations, we continue to see pressure in Europe and middle East.
Russell J. Weiner: Congratulations on the quarter. You talked about the strong performance across income cohorts. Can you expand on what you're seeing with the consumer and whether there are any observable differences in how consumers across cohorts are using the brand, and then any changes in consumer behavior signs of a slowdown within each channel? Thank you.
Speaker Change: Sandeep had talked about this last time.
Speaker Change: The middle East represents a relatively small percentage less than 3% of our operating income, but what makes us continue to expect comps to return to our 3% algorithm in the back half.
Speaker Change: Is exactly what you were saying, we see key markets starting to bring to life. The hungry for more strategy. So if you look at Australia. For example, they launched a campaign that literally is called more.
Russell J. Weiner: You know, we talked, I think, Laura, in Q4, even maybe in Q3, a little bit about what we thought was coming in 2024. And that is coming to fruition. Traffic is hard to come by.
Speaker Change: In Q4 that really does romances products and they've had.
Speaker Change: Delicious new products that have launched as part of that their business has responded accordingly.
Speaker Change: We've looked at a Mexico I talked about them a little bit. They just reported Q1 of 12, 2%.
Russell J. Weiner: Orders are hard to come by in QSR, and I think you're going to see that continue throughout the year. I don't think that's going to be the case, you know, at Domino's because of what we talked about before. And the traffic doesn't just come, it goes back. Like I said before, results are important if they're repeatable, and they're repeatable if there's a formula. And essentially, you know, our pricing is stable and right, our promotional context or promotions have come back, carry out specials, we brought that back, a new product.
Speaker Change: They launched Domino's mania, which is a boost weak and so what we're starting to see is as folks follow this playbook.
Speaker Change: Starting to work internationally and our job and that's part of why we have this rally coming up if they continue to share. These.
Speaker Change: These best practices and Thats why.
Speaker Change: At the back half of the year, we think we'll return to the three three plus algorithm.
Speaker Change: Thank you and our next question comes from the line of Gregory Frankfurt from Guggenheim. Your question. Please.
Hey, Thanks for the question.
Gregory Ryan Francfort: Russell you made a comment about just the third party channel, having more single item orders and I think the reason for why you expected sales to build as you move through the year was because you were still figuring out how to promote on the platform.
Russell J. Weiner: I think the key thing, though, when you're talking about why every income cohort is engaging in Domino's with a positive order count is that a big piece of that is the new loyalty. I mean, we specifically designed it to tap into consumers that we hadn't done before. So reducing the purchase price from $10 to $5, well, all of a sudden, this is a much more compelling program for carryout customers and just customers in general who, you know, don't want to spend a lot of money. At five bucks, they get points.
Speaker Change: Curious what do you think has been working and what do you think still needs to be tweaked to kind of get you to where you want to be as you exit the year from a mixed perspective in terms of pricing and promotional structure.
Russell: Yes, Greg we like I said things are a little bit different on the platform than they were last year.
Russell: Competition promotional competition is just that but we're still sticking to our strategy there of best pricing online at Domino's.
Russell: It's just more about how we manage it. So for example, your base price could be higher if you wanted to discount a little bit more.
Russell J. Weiner: And the other thing is the 20 and 40 point levels; adding those, those redemption levels, to our loyalty program has been key in driving frequency among lower income and lower frequency customers. The amazing thing to me, if you think about the old program, which was only 60 points for a medium two topping, is that the new program, the 20 point and the 40 point level are actually higher than the 60 point level.
Russell: All of that stuff is available to us and so we feel good about.
Russell: Kind of the way our team is handling that we're promoting on the Bluebird channel Uber is promoting us on that Uber channel Sandy.
Russell: Sandeep talked about we're at one 4% of sales, which is up from four in Q4 and all of that makes me really confident that we're going to get to that 3% exit rate for the year.
Russell: Thank you and our next question comes from the line of John <unk> from J P. Morgan Your question. Please.
Hi, Thank you.
John: Context of third party delivery, maybe being a little bit more promotional I was hoping if you could put that in the context of your own delivery fee, we've actually seen some stores, where it can be as high as 799, I think Thats a New York example, but it's still an example.
Russell J. Weiner: And so that gives you a sense of why we're breaking through in every cohort across delivery and carryout. Thank you. And our next question comes from the line of Danilo Gargiulo from Bernstein. Your question, please. Thank you, Congressman McWhorter.
John: How are you feeling about that.
John: The current structure of the relatively fixed delivery fee no matter, how much customer orders, if theres any opportunity to kind of look at that over time and when I think consumers increasingly look at the total landed cost of that delivery. If you feel the overall algorithm.
Danilo Gargiulo: I was wondering if you could elaborate on what is causing international markets to have a little bit more compressed growth this quarter, which was in line with your previous expectations, and particularly, if you could elaborate, if you have been able to estimate how the pressure from the tension in the Middle East is impacting you specifically, and more broadly, if you can take any lessons from the domestic markets that are growing so fast, and you can transfer them over to the international Thank you.
Still in the in the right place and obviously I understand orders being up year over year might just simply answer to that question, but just wanted to get your thought on just delivery overall in terms of consumers value perception. Thank you.
Speaker Change: Yes, yes, thanks, Sean.
Speaker Change: Do price scraping.
Speaker Change: I think either weekly or biweekly basis on delivery fee and so what's important to understand is the recommendations to our franchisees are based on the competitors that are out there.
Speaker Change: The ones that that have stores.
Speaker Change: That are more direct competitors.
Danilo Gargiulo: Thanks. Well, you both asked and answered the question, so great job. Yeah, no, look, Q1 comps were in line with our expectations. The Middle East represents a relatively small percentage, less than 3% of our operating income.
Speaker Change: <unk> pricing is probably a little bit lower than win win.
Speaker Change: People buy things on the Aggregators.
Speaker Change: You are right, though on Aggregators, so that people may sign up for programs, where we're delivering maybe reduce cost or free but at the end of the day, particularly our customers looking at exactly what you said, they probably don't call. It total landed cost. They just call. It is it a bargain is at a value and.
Russell J. Weiner: But what makes us continue to expect comps to return to our 3% algorithm in the back is exactly what you were saying. We see key markets starting to bring to life the hungry for more strategy. So if you look at Australia, for example, they launched a campaign that literally is called More in Q4, that really is romance in products. And they've had delicious new products that have launched as part of that. Their business has responded accordingly. You know, we looked at Mexico, I talked about them a little bit, they just reported a Q1 of 12.2%.
Speaker Change: As long as we're doing that we're aligning competitively with the local competition through our pricing there and we've got best pricing Dominos Dot com.
Speaker Change: That's the balance that we're looking for.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Chris O'connell.
Chris O'connell: Stifel. Your question please.
Chris O'connell: Yes, thanks, good morning.
Chris O'connell: Russell you mentioned the company has seen more individual orders on Newbury channel and I was just wondering does this create an opportunity to be more aggressive in promoting non pizza items on the channel and maybe even attempt to drive sales during the lunch day part and also as a company share of voice on the platform right now among the pizza competitors is that similar to what we might see.
Russell J. Weiner: They launched Domino's Mania, which is a boost week. And so what we're starting to see is as folks follow this playbook, we are starting to work internationally, and our job, and that's part of why we have this rally coming up, is to continue to share these best practices, and that's why at the back half of the year, we think we'll return to a 3 plus outcome. Thank you.
Chris O'connell: Outside of the channel.
Russell: Chris on the second one on share of voice inside versus outside of the channel I'll have to get back to you on that one.
Speaker Change: That's something that I know of.
Top of my head.
Speaker Change: As far as what it is that.
Speaker Change: We sell on Domino's.
Speaker Change: We have been I've been here, a long time and I've seen as promote just pizza on media and I've seen us promote just our individual items like sandwiches or pasta and really the magic for us the big sales becomes when.
Gregory Ryan Francfort: And our next question comes from the line of Gregory Francfort from Guggenheim. Your question, please. Hey, thanks for the question.
Russell J. Weiner: Um, Russell, you made a comment about just the third-party channel having more single item orders. And I think the reason for why you expected sales to build as you move through the year was because you were still figuring out how to promote on the platform. I'm curious, what do you think has been working?
Speaker Change: Uses for for this idea of Pizza plus when you offer both and Thats really what makes it matches all about it.
Speaker Change: So.
Speaker Change: What we don't want to do is we don't want to slow down momentum and what's really working.
Speaker Change: Through experiments in other area, we have looked at lunch before we got a nice lunch business, but that business is not individual users and so I think what this allows us to do is tap into individual users who think they are willing to spend a lot more money on a per person basis than they would through us and then once they are part of dominoes, obviously they are.
Russell J. Weiner: And what do you think still needs to be tweaked to kind of get you to where you want to be as you exit the year from a mixed perspective in terms of pricing and promotional structure? Yeah, Greg, we, like I said, things are a little bit different on the platform than they were last year; the competition, the promotional competition is just up, but we're still sticking to our strategy of best pricing online at Domino's. It's just more about how we manage it. So, for example, your base price could be higher if you want to discount it a little bit more. I mean that all of that stuff is available to us.
Speaker Change: <unk> got the ability to then go back and buy those items and get loyalty points for it and all that so.
Speaker Change: Probably the better way to think about it is we're at our best when we promote our entire menu.
Speaker Change: Yes.
Speaker Change: Thank you and our next question comes from the line of Andrew <unk> from.
Andrew Michael Charles: BMO capital markets. Your question please.
Andrew Michael Charles: Hey, good morning, Thanks for taking my question.
Andrew Michael Charles: Wanted to ask about the U S store growth pipeline in the first half of the year I know, it's supposed to be roughly flat year over year and it seems like it's tracking there, but how are you seeing that pipeline build with the comp strength in margins, obviously moving in the right direction and just wanted to get.
Russell J. Weiner: And so we feel good about kind of the way our team is handling that. We're promoting on the Uber channel. Uber is promoting us on the Uber channel. Sandeep talked about how we're at 1.4% of sales, which is up from 0.4 in Q4. And all of that makes me really confident that we're going to get to that 3% exit rate. Thank you.
Andrew Michael Charles: A sense from you on when do you expect in your confidence that you will see that inflection higher in the back part of the year and even as we move into 2025 and beyond thanks.
Speaker Change: Yes. Thanks.
We've got visibility in the pipeline through the remainder of this year through next year and I feel really good about hitting the 175 plus number.
John William Ivankoe: And our next question comes from the line of John Ivankoe from J.P. Morgan. Your question, please. Hi.
Speaker Change: Stores tend to be a lagging indicator.
Speaker Change: Performance and.
As you can expect with profits going up with order counts going up.
Russell J. Weiner: Thank you. In the context of third-party delivery, maybe being a little bit more promotional, I was hoping you could put that in the context of your own delivery fee. We've actually seen some stores where it can be as high as $7.99. I think that's a New York example, but it's still an example.
Speaker Change: We're coming up more and more attractive proposition everyday to our franchisees but.
Speaker Change: Regardless of Q1, you should note, but before these results the pipeline was clear on the 175 plus.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of David Tarantino from Baird. Your question. Please.
Hi, Good morning, Russell I had a question related to that.
Russell J. Weiner: How do you feel about the current structure of the relatively fixed delivery fee, no matter how much a customer orders, if there's any opportunity to kind of look at that over time? And when I think consumers increasingly look at the total landed cost of that delivery, if you feel the overall algorithm is still in the right place? I understand orders being up year over year might just simply answer that question, but just wanted to get your thought on just delivery fees overall in terms of consumers' value perception.
David E. Tarantino: One of the comp drivers that maybe gets underplayed and thats. The advertising approach. It seems like you made quite a big evolution in the advertising.
David E. Tarantino: Versus what you've done in the past.
David E. Tarantino: In the first quarter and maybe maybe before the first quarter with a lot more focus on the food.
David E. Tarantino: And the value as opposed to.
David E. Tarantino: To some other topics. So I was just wondering if you could give us a sense of how much of a comp driver you think that was methods.
Russell J. Weiner: Thank you. Yeah, yeah, thanks, John. You know, we do price scraping on a, I think, either weekly or bi weekly basis on delivery fee. And so what's important to understand is the recommendations to our franchisees are based on the competitors that are out there. Kind of the ones that that have stores that that are more direct competitors, whose pricing is probably a little bit lower than when the when people buy things on the aggregate, You're right, though, on aggregators, so that people may sign up for programs where delivery may be reduced cost or free, but at the end of the day, particularly our customers, looking at exactly what you said, they probably don't call it total landed cost, they just call it, is it a bargain, is it a value?
David E. Tarantino: It's even easier to sell.
David E. Tarantino: Separate that out from the others.
Yes, David I'm really glad you noticed the team I think has done a fantastic job, we brought on a brand new food photography.
Speaker Change: Phil filmmaker.
Speaker Change: And the Deliciousness on the Domino that I mean, it's just it's a different AD then than it used to be.
Speaker Change: And you take that and combine that with the talk value the renown value I talked about earlier.
Speaker Change: And Thats tough breakthrough I have a lot of.
Speaker Change: People I know, saying Wow it it feels like Domino's is advertising a lot more this year than it ever did before and the answer is not really what's happening is what we're doing is breaking through more.
Speaker Change: And that's that.
Speaker Change: That's where you want to be and I think when we talked about hungry for more.
Speaker Change: The am and we are the most delicious food and they are now and value we're going to be the two things we're going to lean into so I appreciate you noticing that.
Russell J. Weiner: And as long as we're doing that, we're aligning competitively with the local competition through our pricing there, and we've got the best pricing on dominoes.com. That's the balance that we're looking for. Thank you. And our next question comes from the line of Chris O'Connell, from Stiefel. Your question, please. Yeah, thanks. Good morning.
Speaker Change: Okay.
Speaker Change: Thank you and our next question comes from the line of Brian <unk> from Morgan Stanley. Your question. Please.
Brian John Bittner: Yeah. Thanks, Good morning, maybe just on the debt.
Brian John Bittner: Operational focus on what was the nature of that and what's what's still planned for this year.
Are those things that sort of a cost benefit in your view or is it more just about kind of product consistency and service time.
Chris O'connell: Russell, you mentioned the company seeing more individual orders on the Uber Eats channel. And I was just wondering, does this create an opportunity to be more aggressive in promoting non-pizza items on the channel and maybe even attempt to drive sales during the lunch hour part? And also, as a company, do you share a voice on the platform right now among the pizza competitors? Is that similar to what we might see outside of the channel?
Yeah. Thanks, it's really is about consistency and and.
Brian John Bittner: Consistency be gets repeat purchase.
Brian John Bittner: And so the way I think of it as we in the U S. We sell about $1 5 million pieces every day.
Brian John Bittner: We don't want to look at it that way, we want to look at we sell one pizza $1 5 million times.
Brian John Bittner: Every pizza that we make as a chance to delight, our customer or disappoint, a customer and so the training. We had last year was a little bit more focus on circle of operations technology and Youre seeing the results now in delivery times. The stuff. We're doing this year as you said for the first sprint was on the Doe than we've got ingredients in baking.
Chris O'connell: You know, Chris, on that second one about sharing a voice inside versus outside the channel, I'll have to get back to you on that one. That's not something that I know off the top of my head.
Brian John Bittner: That's all about the consistency and consistency really drives repeat purchase.
Brian John Bittner: So you get that right plus you have the loyalty program on top of that then you have two things driving repeat purchase and Thats, where we want to be we think this can be.
Russell J. Weiner: As far as what it is that we sell on Domino's, you know, we have been, I've been here a long time, and I've seen us promote just pizza on the media, and I've seen us promote just our individual items, like, you know, sandwiches or pasta, and really, the magic for us is when, I've used this before, this idea of pizza plus, when you offer both. And that's really what mix and match is all about.
Brian John Bittner: Sensitive for US an offensive move on consistency.
Thank you. Our next question comes from the line of Peter Saleh from <unk>. Your question. Please.
Peter Mokhlis Saleh: Great. Thanks.
Peter Mokhlis Saleh: I just wanted to ask about the U S pizza category in general.
Peter Mokhlis Saleh: Russell do you think it's taking share at this time at this point in time, I think coming out of Covid really 'twenty one.
Russell J. Weiner: And so, you know, what we don't want to do is slow down momentum in what's really working through experiments in other areas. We have looked at lunch before. We got a nice lunch business, but that business is not individual users. And so I think what this allows us to do is tap into individual users who are, frankly, willing to spend a lot more money on a per person basis than they would through us.
Peter Mokhlis Saleh: There was some pizza fatigue going on but that seems to have subsided. Just curious if you think the category itself is growing faster than it had been in the past couple of years.
Peter Mokhlis Saleh: Or are you guys, just taking share with some of the self help initiatives that you have in place. Thanks.
Speaker Change: Yes, I think.
Speaker Change: We've returned to where we were what are calling call calling card was over time, which is that this is a category that is.
Russell J. Weiner: And then once they're part of Domino's, obviously, they've got the ability to then go back and buy those items and get loyalty points for it and all that. So that's probably the better way to think about it is we're at our best when we promote our entire menu. Thank you.
Speaker Change: Tremendous and it's growing kind of in line with population. What we have always done is we've been what I call it equal opportunity share stealing.
Speaker Change: And.
Speaker Change: Frankly, we lost that.
Speaker Change: Last year, two years and we're back.
Speaker Change: And so we're seeing those same dynamics and these help self help initiatives.
Speaker Change: Are helping drive share in delivery and Carryout.
Andrew Strelzik: And our next question comes from the line of Andrew Strelzik from BMO Capital Markets. Your question, please. Hey, good morning.
Speaker Change: Carryout numbers are just tremendous.
One of the things we always talk about is is the incremental <unk> of Carryout and so when we split our store 80% of the Carryout volume is incremental.
Russell J. Weiner: Thanks for taking the question. I wanted to ask about the US store growth pipeline. The first half of the year is supposed to be, you know, roughly flat year over year, and it seems like it's tracking there.
Speaker Change: So a carryout is growing growing big time.
Speaker Change: That is yet another reason in addition to store profitability why franchisees are going to want to open up stores and so I think all of this stuff is.
Russell J. Weiner: But how are you seeing that pipeline build with the comp strength and margins obviously moving in the right direction? And just wanted to get a sense from you on when you expect and your confidence that you'll see that inflection higher in the back part of the year and even as we move into 2025 and beyond. Thanks. Yeah, thanks. We, you know, we've got visibility of the pipeline through the remainder of this year and into next year, and I feel really good about hitting the 175 plus number.
Speaker Change: Ah is a cycle that's positive for us.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Jon Tower from Citi. Your question. Please.
Jon Michael Tower: Great. Thanks for taking the question I'm curious I wanted to come back to your comments earlier Russell regarding the loyalty program. I think you had mentioned in the U S that you are seeing some pretty good.
Jon Michael Tower: Uptake from new lapsed users light users, but I'm curious to hear about how existing loyalty members have responded to the program. So far and all the changes that are taking place and then separately in terms of.
Russell J. Weiner: Stores tend to be a lagging indicator of, you know, performance. And, as you can expect, with profits going up with order counts going up, we're becoming a more and more attractive proposition. Yeah, every day to our franchisees, but regardless of Q1, you should know before these results, the pipeline was clear on the 175+. Thank you. And our next question comes from the line of David Tarantino from Baird. Your question, please. Hi, good morning, Russell. I had a question related to one of the comp drivers that maybe gets underplayed.
Jon Michael Tower: The consumer demand, obviously, you've had a lot of promotional heavy promotional windows during the fourth quarter and into the first quarter here. How is the consumer responded to the brand outside of those windows.
Speaker Change: Got it.
Speaker Change: Well first on the loyalty program I think it's safe to say that not only new customers, but existing customers are really engaging in the program if youre an existing customer and you had 50 points in your <unk>.
Speaker Change: Loyalty bank.
Speaker Change: You woke up when we launched this new program and Youre able to get two free items instead of zero and so there are a lot of happy customers, who are existing customers there.
When you talk about consumer demand.
Speaker Change: I Love I get this question a lot of hey, guys. It seems like Youre, increasing your promotional cadence, we're really not there they're just more impactful.
David E. Tarantino: And that's the advertising approach. It seems like you made quite a big evolution in the advertising, you know, versus what you did in the past, in the first quarter, and maybe maybe before the first quarter, you know, with a lot more focus on the food and the value, as opposed to some other topics. So I was just wondering if you could give us a sense of how much of a comp driver you think that was, if it's, you know, if it's even easy to separate that out from the others.
And I think Thats why folks are talking about them more but we've had a 52 week count promotional calendar.
Speaker Change: For years and years and years and.
Speaker Change: And the Big difference now is just they are working better.
Speaker Change: Working better because rather than just focus on price points, we're focused on.
Speaker Change: On things that.
Speaker Change: Break cultural tensions.
Speaker Change: The Carryout tips everywhere you go I'm sorry.
Speaker Change: Typically type everywhere you go today.
Speaker Change: Whether they're giving you extra surface or not folks are.
Russell J. Weiner: Thanks. Yeah, David, I'm really glad you noticed. The team, I think, has done a fantastic job.
Asking for tips or you get that screen up there in fact, I think maybe after this call I'm expecting John you to asking you to tip your.
Russell J. Weiner: We brought in a brand new food photographer, and filmmaker on and added the deliciousness of the Domino's ad. I mean, it's just a different ad than it is, and you take that and combine that with the talk value, the renowned value I talked about earlier, and that stuff breaks through.
Speaker Change: But what we're doing though is we're using that talk value to get people to talk more about dominoes, because we're breaking that tension and thats why it feels like we're at we're doing more but 52 weeks of promotions, what we've done for a long time.
Speaker Change: I'm going to add something to that.
Russell J. Weiner: I have a lot of, you know, people I know saying, wow, it feels like Domino's is advertising a lot more this year than it ever did before. And the answer is not really. It's what's happening is what we're doing is breaking through more. And that's where you want to be.
Speaker Change: John because I think bill when you look at the promotional windows as we talked about what's the cadence outside the promotional windows. It's very good but why is it very good it's because of the loyalty program.
Speaker Change: The activity that's actually generated through the loyalty program is really dispersing transactions and redemptions right through the quarter and I think that just speaks to the strength of what we're doing with Renault and value and the loyalty program specific yes, that's a great point, Sandy, which I don't like to admit when Sandy makes a great point. So just wanted to know.
Brian James Harbour: And I think when we talked about hungering for more, the M and the R, the most delicious food and the renowned value were going to be the two things we're going to lean into, so I appreciate you noticing that. Thank you. And our next question comes from the line of Brian Harbour from Morgan Stanley. Your question, please. Yeah, thanks. Good morning.
Speaker Change: Are there other pieces in the renowned value that are different than what we did before is to get this value you have to sign up for the loyalty program you can get mix and match you don't have to be a loyalty member, but to get the carryout tips to get emergency pizza to get.
Russell J. Weiner: Maybe just on the operational focus on dough, what was the nature of that? And what's still planned for this year? Are those things that sort of have a cost benefit in your view?
Speaker Change: Tipped four year of delivery.
Speaker Change: You have to be part of the loyalty program and so what these things are doing is they are working together versus working separately and I think you just see the compounding effects of that.
Russell J. Weiner: Or is it more just about the kind of product? Yeah, thanks. It's it's really about consistency. And what and consistency begets repeat purchase. And so, you know, the way I think of it is, you know, we in the US sell about one and a half million pizzas every day. We don't want to look at it that way.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Jeffrey Bernstein from Barclays. Your question. Please.
Jeffrey Andrew Bernstein: Great. Thank you very much.
Jeffrey Andrew Bernstein: A question on the near term comps for Domino's and the industry I guess on Domino's I know you mentioned the second quarter comp below the $5 six in the first quarter.
Russell J. Weiner: We want to look at how we sell one pizza one and a half million times. Every pizza that we make is a chance to delight a customer or disappoint a customer. And so the training we had last year was a little bit more focused on the use of operations technology, and you're seeing the results now in delivery time. The stuff we're doing this year, as you said, the first sprint was on the dough, then we've got ingredients and baking, that's all about the consistency, and consistency really drives repeat purchase.
Wondering whether that surprises you relative to plans to start of the year I would think that the ramp in Uber and loyalty and easier compares with more than offset the feet of emergency pizza. So I'm just wondering.
Jeffrey Andrew Bernstein: Whether that similarly surprises you and and Russell on the industry you mentioned the slowing <unk> category in terms of seemingly the macro.
I was wondering would you have a decade plus of experience. There does that surprise you I would think <unk> would be viewed as more defensive into a slowing macro and yet perhaps we're seeing something otherwise. So just a question on domino's and the broader macro thank you.
Russell J. Weiner: So if you get that right, plus you have the loyalty program on top of that, then you have two things driving repeat purchase, and that's what we want. We think this can be an offensive move for us.
Speaker Change: I'll ask <unk>.
Speaker Change: I need to talk about the near term comps and then I'll answer your question on transactions.
Speaker Change: Yeah. So so I think on the near term comps in Q2 that we talked about on the call really it's not so surprising at all I mean, this is pretty much inline with our plans.
Russell J. Weiner: Thank you. Our next question comes from the line of Peter Saleh from BTIG. Your question, please. Great, thanks.
Peter Mokhlis Saleh: I just wanted to ask about the US pizza category in general. Russell, do you think it's taking share at this point in time? I think coming out of COVID, out of really 21, there was some pizza fatigue going on, but that seems to have subsided.
Speaker Change: We view that we've had great success with the months, who pizza and we were glad we did it because we've actually acquired customers into the loyalty program.
Speaker Change: But we did see some some lift which I think will kind of normalize as we go into Q2.
Speaker Change: The point, we made making since the beginning of the are we expecting ramping and Uber to happen over the course of the year.
Speaker Change: We expect to be slightly below our Q1 performance, which was very very good and we still think Q2 is going to be very very good but in line with what we expected.
Russell J. Weiner: Just curious if the category in of itself is growing faster than it has been in the past couple of years? Or are you guys just taking a share with some of the self-help initiatives that you have in place? Thanks.
Speaker Change: I think on the <unk>.
Space Jeff.
Speaker Change: I was talking about was really more order count.
Speaker Change: I think there has been pricing that's been taken in the category and consumers are responding now youre seeing it.
Russell J. Weiner: Yeah, I think, you know, we've returned to where we were what our calling card was over time, which is that, you know, this is a category that is tremendous, and then it's growing kind of in line with population. What we've always done is we've been what I call an equal opportunity share. And, you know, frankly, we lost that last year, two years, and we're back. And so we're seeing those same dynamics.
Speaker Change: And the results and what.
Speaker Change: I'm excited about for US is the pricing we've taken is really in the rearview mirror and so we can focus on driving value profitable value.
Speaker Change: To both our customers and our franchisees and look I'm sure there'll be others in the industry, who are also doing the same but I think we'll be a little bit of an outlier there.
Speaker Change: And I just want to add one thing on this because we've.
Speaker Change: <unk> talked about in the prepared remarks on the Russell reported on spot pricing.
Speaker Change: Interesting of what smart pricing as we took a lot of spot pricing in 'twenty two and.
Russell J. Weiner: And these self-help initiatives are helping drive share in delivery and carry out. I mean, the carry out numbers are just tremendous. And, you know, One of the things we always talk about is... The Incrementality of Carriage.
Speaker Change: Market was highly inflationary.
Speaker Change: Smart pricing in 2003 was almost taking no pricing.
Speaker Change: And that's really what actually drove that expert value differential that is now really shoring up the <unk>.
Speaker Change: Number of questions. We got for right through 'twenty three on do you have pricing power why youre not taking pricing because everybody else is taking pricing, but we were really focused on two things one is making sure customer value was maintained.
Russell J. Weiner: So when we split a store, 80% of the carryout volume is incremental. And so if carryout is growing, growing big time, that is yet another reason, in addition to store profitability, why franchisees are going to want to open up stores. And so I think all this stuff is a cycle that's positive.
Speaker Change: Making sure that the flow through from a franchisee perspective had been restored and that happened. After the 22 pricing that we took and so we just kept on the suite of narrow and we were really paying up for whats ended up happening in Q4 and Q1, Yes, I think one of the things we talked about before with consistency of product. If there are two things that we've got there.
Jon Michael Tower: Thank you. And our next question comes from the line of Jon Tower from Citi. Your question, please. Great, thanks for taking the question.
Russell J. Weiner: I'm curious, I wanted to come back to your comments earlier, Russell, regarding the loyalty program. I think you mentioned in the US that you're seeing some pretty good uptick from new lapsed users and light users. But I'm curious to hear about how existing loyalty members have responded to the program so far and all the changes that have taken place. And then separately, in terms of consumer demand, obviously, you've had a lot of promotional, heavy promotional windows during the fourth quarter and into the first quarter here.
Tremendous ecommerce business. So we know we can tell on conversion, where we do things right and we do things wrong.
Speaker Change: Product consistency is really important the other thing is pricing consistency people don't want whiplash.
Speaker Change: But to get what they expect in and.
Speaker Change: We took that in 2022 and now they're getting what they expect and it's profitable for our franchisees and we're seeing that in the numbers.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Meredith Jensen from HSBC. Your question. Please.
Meredith Jensen: Yes, Hi, Chris.
Meredith Jensen: Prior calls I've heard you all speak about the experience Domino assist hard internationally with third party delivery and now that it's been rolled out here I was just kind of wondering if you might speak a little bit about.
Russell J. Weiner: How has the consumer responded to the brand outside of those windows? Well, first, you know, on the loyalty program. I think it's safe to say that not only new customers but existing customers are really engaging with the program. If you're an existing customer and you had 50 points in your loyalty bank, you woke up when we launched this new program, and you were able to get two free items instead of zero.
Meredith Jensen: What are the maybe the consumer behavior differences that youre seeing.
Meredith Jensen: The other thing that.
Meredith Jensen: They have come up.
Even anecdotally about.
Meredith Jensen: The difference is there.
Yes sure.
Really what we've seen so far is some of it very in line with what we saw before we thought going in which was these customers as we said earlier would be more single users.
Russell J. Weiner: And so there are a lot of happy customers who are existing customers there. When you talk about consumer demand, I mean, I love, I get this question a lot. Hey, guys, it seems like you're increasing your promotional key there. We're really not; they're just more impactful.
Meredith Jensen: They'd be younger.
Meredith Jensen: They especially on over would be incremental to us and Sandeep has talked about a few months into this it looks like they are about <unk>.
Meredith Jensen: 75% incremental.
Meredith Jensen: Two thirds im sorry about two thirds into incremental yes, sorry about two thirds incremental and so.
Russell J. Weiner: And I think that's why folks are talking about them more. But we've had a 52 week count promotional calendar for years and years and years. And I and, The big difference now is just that they're working better. They're working better because rather than just focus on price, we're focused on things that, you know, break cultural tensions. I mean, you know, the carry out tips everywhere you go.
Meredith Jensen: The thing on the other side is just more of the just the promotional nature of it.
Meredith Jensen: <unk>.
Meredith Jensen: Pricing and profit ends up being kind of what we thought but how we're getting to it it's just in a little bit of a different way.
Speaker Change: Anything to add.
Speaker Change: Great.
Speaker Change: Okay.
Thank you.
Speaker Change: And our next question comes from the line of Alex Slagle from Jefferies. Your question. Please.
Alex Slagle: Okay. Thanks.
Alex Slagle: Everything coming together here I had a question on the operations in the act.
Alex Slagle: Toleration delivery volumes seemingly just starting and so far you're able to drive the speed improvements, but as the volumes ramp further.
Russell J. Weiner: I'm sorry, you tip, we tip everywhere you go today. You know, whether they're giving you extra service or not. Folks are asking for tips, or you get that screen up there. In fact, I think maybe after this call, you know, I'm expecting Jon, you to ask me to tip you.
Alex Slagle: More of these individual orders on <unk>, perhaps more surges in demand at certain times I mean, how much of your ability to keep up with the volume as it improves speed will require a step up in hiring drivers versus productivity and technology, driven improvements or other opportunities that you see out there.
Russell J. Weiner: But what we're doing, though, is we're using that talking value to get people to talk more about Domino's because we're breaking that tension. And that's why it feels like we're doing more. But 52 weeks of promotions, what we've done for a long time. I'm going to add something to that, Jon, because I think they'll... Look at the promotional window that we talked about. The activity that's actually generated through the loyalty program is really dispersing transactions and redemptions right through the window. And I think that just speaks to the strength of what, Yeah, that's it. That's a great point, Sandeep, which I don't like to admit when Sandeep makes great points, but this was a good one.
Speaker Change: Yes, well the nice thing about our business as it scales really really well and so.
Speaker Change: I know you noted that it sounds like we have to add a driver of every time, we add an order and so what we're trying to do and what we have done with a lot of these back of house improvements as we've made these orders.
Speaker Change: More scalable more leverage at all.
Speaker Change: And so that's that's that's that's part of the process and but secondarily as we talked about.
Speaker Change: Five for Domino's Pizza now is an attractive job.
Speaker Change: We're about to see a whole bunch of.
Speaker Change: Franchisees and more importantly, future franchisees at a rally in order to become a domino's franchisee you need to start as a driver or a pizza maker.
Sandeep Reddy: You know, the other pieces of the renowned value that are different than what we did before are to get this value. You'd have to sign up for the loyalty program, right? You can get mix and match. You don't have to be a lawyer.
Speaker Change: So with the success of the brand what we're seeing is.
Speaker Change: People attracted to both the driver job and the opportunity at Domino's.
Speaker Change: Thank you and our final question for today comes from the line of Jim <unk> from Stephens. Your question. Please.
Russell J. Weiner: But to get the carry-out tips, to get emergency pizza, to get tips for your delivery, you have to be part of the loyalty program. And so what these things are doing is they're working together versus working separately. And I think you just see the compounding effects. Thank you. And our next question comes from the line of Jeffrey Bernstein from Barclays. Your question, please.
Jim: Hi, guys. Thanks for squeezing us.
Jim: I wanted to ask on the New York style Pizza innovation, just as how that Triangulates with some of the other promotions you guys have going on.
Jim: Just any color you might have on driving either new user new consumption from people that are.
Jeffrey Andrew Bernstein: Just a question on the near-term comps for Domino's and the industry. On Domino's, I know you mentioned the second quarter comp below the 5-6 in the first quarter. I'm wondering whether that surprises you relative to plans at the start of the year. I would think that the growth in Uber and Loyalty and Easier Compares would more than offset the fate of Emergency Pizza. So just wondering whether that similarly surprises you. And Russell, on the industry, you mentioned a slowing QSR category in terms of, seemingly, the macro. Just wondering, with you having a decade-plus of experience there, does that surprise you?
Jim: Discovering domino's on the third party apps, where potentially new comers to the loyalty program and how you can tie innovation into those new newer users.
Speaker Change: Yes, Jim.
Jim: It's a great question.
New York is our first new product launch of the year and one of the things that testing shows for US is this is a different customer as the customer prefers a center.
Jim: Pizza is a customer who really.
Speaker Change: Ingredient quality is important to them and so we think bringing this into your portfolio is actually going to be attractive to folks who maybe.
Sandeep Reddy: I would think QSR would be viewed as more defensive in a slowing macro, and yet perhaps we're seeing something otherwise. Question on Domino's and the broader macro. Thank you. I'll ask Sandeep to talk about the near-term comps, and then I'll answer your question about transactions. Yeah, so I think on the near-term comps in Q2 that we talked about on the call, really it's not surprising at all. I mean, this is pretty much in line with our plans.
Speaker Change: Our pizza lovers, but.
Speaker Change: Our traditional hand, tossed maybe a little bit too.
Speaker Change: Two two thing for them and cross type and so it's not this is ed.
Speaker Change: You should have said this in the in the remarks. This is not a L. T O for us and so it's important to know when we launched products. Most of the time, because we think they are permanent fixtures to our menu. The other nice thing about New York style, which I like and of course, we're promoting it through loyalty with points. Like you said is our New York style is available in all three.
Russell J. Weiner: We knew that we'd had great success, and we were glad we did that because it actually acquired cost... But we did see some lift, which I think we'll kind of normalize. But to the point we've been making since the beginning of the year, we're expecting ramping and Uber. We expect to be slightly below our Q1 performance, very, very, and we still think Q2 is going to be very, very good, but in line. And I think on the QSR... Jeff.
Sizes and medium large and a lot of cases extra large but by being part of a media means that could be part of our 699 mix and match and that that was that was super important.
Thank you Jim that was our last question of the call I want to thank you all for joining our call today and we look forward to speaking to you. All again soon you may now disconnect.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Sandeep Reddy: What I was talking about was really more order count. I think, you know, there's just been pricing that's been taken in the category, and what I'm excited about for us is that the pricing we've taken is really in the rearview mirror. And so we can focus on driving value, profitable value, to both our customers and our franchisees. Look, I'm sure there'll be others in the industry who are also doing the same, but I think we'll be a little bit of an outlier.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
[music].
Sandeep Reddy: Yeah, and I just want to add one thing to this because I talked about the prepared remarks and Russell referred to it on spot price. Interesting about Smart Pricing is we took a lot of Smart Pricing in 2022, while the Smart Pricing in 23 was almost taking no price.
Speaker Change: Yeah.
[music].
Sandeep Reddy: And that's really what actually drove that value differential that is now really showing. The number of questions we got right through 23 on do you have pricing power, why are you not taking pricing, because everybody else is taking pricing. We were really focused on two things. Please see the complete disclaimer at https://sites.google.com. And so we just kept on the straight and narrow, and we were really tying up for what ended up happening.
Russell J. Weiner: Yeah, I think, you know, one of the things we talked about before was consistency of product. If there are two things that we've got this tremendous e-commerce business, so we know we can tell on conversion when we do things right and we do things wrong. Product consistency is really important. The other thing is pricing. Unknown Executive, Nerses Setyan, Danilo Gargiulo, Cynthia Headen, Domino's Pizza Inc. Thank
Meredith Jensen: And our next question comes from the line of Meredith Jensen from HSBC. Your question, please? Yes, hi. I was on prior calls. I've heard you all speak about the experience Domino's has had internationally with third-party delivery.
Russell J. Weiner: And now that it's been rolled out here, I was just kind of wondering if you might speak a little bit about sort of the maybe the consumer behavior differences that you're seeing or some other things that, you know, that have come up, even anecdotally about the differences there. Thanks. Yeah, sure.
Russell J. Weiner: I mean, really, what we've seen so far is some of it very in line with what we saw before, what we thought going in, which was these customers, as we said earlier, would be more single users, you know, they'd be younger. And they, especially on Uber, would be incremental to us. And Sandeep has talked about, you know, a few months into this, it looks like they're about 75% incremental. Two-thirds incremental. Oh, sorry. About two-thirds incremental. Yeah, sorry.
Russell J. Weiner: About two-thirds incremental. And so the thing on the other side is just more the... The promotional nature of it, and the pricing and profit end up being kind of what we thought, but how we're getting to it is just a little bit of a different way. Thank you. And our next question comes from the line of Alex Slagle from Jeffreys. Okay, thanks.
Alexander Russell Slagle: Great to see everything coming together here. I did a question on the operations and the acceleration and delivery volumes, seemingly just starting and so forth. You're able to drive the speed improvements. But as the volumes ramp further, I guess there will be more of these individual orders on 3P and perhaps more surges of demand at certain times. I mean, how much of your ability to keep up with the volumes and improve speed will require a step up in hiring drivers versus productivity and technology-driven improvements or other opportunities that you see out there?
Alexander Russell Slagle: Yeah, well, the nice thing about our business is it scales really, really well. And so, you know, there's, I know you know this, but it sounds like we have to add a driver every time we add an order.
Russell J. Weiner: And so what we're trying to do, what we have done with a lot of these back-office improvements, is we've made these orders just more scalable, more leverageable. And so that's part of the process. But secondarily, as we talked about, driving for Domino's Pizza now is an attractive job. We're about to see a whole bunch of franchisees, and more importantly, future franchisees, at our rally. In order to become a Domino's franchisee, you need to start as a driver. And so with the success of the brand, what we're seeing is, you know, Thank you.
Russell J. Weiner: And our final question for today comes from the line of Jim Salera from Stevens. Your question, please. Hi guys, thanks for squeezing us in. I wanted to ask about the New York style pizza innovation, just as you know, how that triangulates with some of the other promotions you guys have going on, in just any color you might have on driving either new use or new consumption from people that are discovering Domino's on the third-party apps or potentially, you know, newcomers to the loyalty program, and how you can tie innovation into those new Yeah, that's a great question.
Speaker Change: [music].
James Ronald Salera: You know, New York is our first new product launch of the year. And one of the things that testing shows for us is that this is a different customer. This is a customer who prefers a thinner, foldable pizza to the customer who really, you know, ingredient quality is important to them. And so we think bringing this into a portfolio is actually going to be attractive to folks who maybe are pizza lovers but are traditional hand-toss maybe a little bit too, you know, [inaudible] The other nice thing about New York Style, which I like, and of course, we're promoting it through loyalty with points, like you said, is that our New York Style is available in all three sizes, in medium, large, and in Thank you, Jim.
Russell J. Weiner: That was our last question of the call. I want to thank you all for joining our call today, and we look forward to speaking to you all again soon. Disconnect.
Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good day. [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com SourceFed.com, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Thank you for standing by. Welcome to Domino's Pizza's first quarter 2024 earnings conference call. At this time, all participants are in listen only mode.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered, and you'd like to remove yourself from the queue, simply press star 11 again.
Greg Lemenchick: As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Mr. Greg Lemenchick, Vice President of Investor Relations. Please go ahead, sir.
Greg Lemenchick: Good morning, everyone. Thank you for joining us today for our first quarterly conference call. Today's call will begin with our Chief Executive Officer, Russell Weiner, followed by our Chief Financial Officer, Sandeep Reddy, and the call will conclude with a Q&A session. The forward-looking statements in this morning's earnings release and 10-Q, both of which are available on our IR website, also apply to our comments on the call today. However, actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in our filings with the S.A.
Greg Lemenchick: In addition, please refer to the 8K Earnings Ruling. To find disclosures and reconciliations of non-GAAP financial... that may be referenced on today's call. This morning's conference call is being webcast and is also being recorded for replay via our website. We want to do our best this morning to accommodate as many of your questions as time permits. As such, we encourage you to ask one question only. With that said, I'd like to turn the call over to Russ.
Speaker Change: [music].
Russell J. Weiner: Thanks, Greg. And good morning, everybody. Our Q1 results demonstrated that our hungry for more strategy is delivering on its promise, driving more sales, more stores, and more profits. We drove strong comp performance in the U.S. that flowed through to the bottom line with double-digit profit margins. And our growth in the U.S. came through positive order counts across all income cohorts, in both our carry out and delivery. We saw the largest growth in our lower income cohorts, which are undoubtedly benefiting from the renowned values. I'd like to highlight our first quarter results through the lens of our M-O-R-E, Hungry for More pillar. As you know, M stands for the most delicious food.
Russell J. Weiner: We know we have the most delicious food in the industry and are focused on showcasing that with more mouth-watering food photography in all of our marketing and sales. We also ran a campaign that highlighted our pan- Premium Product that brought news to this cross-type for the first time. And I'm excited to announce that our first product innovation of the year, New York Style, launches on air today. The idea for New York Style came from customers who prefer a thinner, more foldable crust than our traditional hand.
Russell J. Weiner: We believe that this new cross style will drive incremental sales but will also drive deliciousness as the foldable crust lets us focus more on our incredible toppings, including a really unique blend of provolone cheese that comes on every New York style. Additionally, this crust option will be available as part of our mix and match offer, and Domino's Rewards members can redeem 60 points for a free medium two-topping New York-style pizza.
Speaker Change: Thank you for standing by and welcome to Domino's Pizza first quarter 2024 earnings Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone if your question has been.
Greg: Answered and you'd like to remove yourself from the queue simply press Star One again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program. Mr. Greg Let me check Vice President of Investor Relations. Please go ahead, Sir good morning, everyone. Thank you for joining us today for our first.
Russell J. Weiner: This is another example of how innovation is designed to drive value and more customers into our lives. The O in Hungry for More stands for Operational Excellence. This is how we'll deliver on our promise to have the... Consistently driving a great experience with our customers. As I shared on our last earnings call in 2024, we're rolling out a new service program we're calling more delicious operations, a series of three product training sprints that focused on our dough, how we build and make our products, and how we. In Q1, we embarked on our first sprint, which focused on our dough, and rolled this out across all 6,800-plus students
Speaker Change: Quarter Conference call today's call will begin with our Chief Executive Officer, Rob The Wiener followed by our Chief Financial Officer Sandeep Reddy.
Speaker Change: The call will conclude with a Q&A session.
Speaker Change: The forward looking statements in this morning's earnings release and 10-Q, both of which are available on our IR website also apply to our comments on the call today.
Speaker Change: Actual results or trends could differ materially from our forecast for more information. Please refer to the risk factors discussed in our filings with the SEC.
Russell J. Weiner: We continue to see benefits from our service initiatives, and in Q1, we actually delivered more pizzas than we did in Q1 of last year at improved delivery times. I am just so proud of our office. Our third Hungry for a Pillar is R for Renowned Value.
Speaker Change: In addition, please refer to the 8-K earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced throughout todays call.
Speaker Change: <unk> conference call is being webcast and is also being recorded for replay via our website.
Russell J. Weiner: I want to expand on what renowned value means. It's not about just having the lowest price in the market, but about providing value that's innovative and that's memorable. Renown Value breaks through the CF stamina discounts that you see in the marketplace.
Speaker Change: We want to do our best this morning to accommodate as many of your questions as time permits as such we encourage you to ask one question only.
Speaker Change: I'd like to turn the call over to Russell.
Thanks, Greg and good morning, everybody. Our Q1 results demonstrated that are hungry for more strategy is delivering on its promise driving more sales more stores and more profit.
Russell J. Weiner: Value The buy one, get one free mechanic reinvents this mechanic and creates Emergency pizza, which performed better than any buy one, get one free I've done in my career, was a meaningful driver to our comps in both Q4 of 23 and... And it not only drove increased orders but also the acquisition of members into our loyalty program. Domino's Rewards continues to perform extremely well and was the key driver of our strong U.S. The program is delivering on our objectives. Active member growth rates are up significantly since the launch of our new program.
Russell: We drove strong comp performance in the U S that flowed through to the bottom line with double digit profit growth.
Russell: And our growth in the U S came through positive order counts across all income cohorts in both our Carryout and delivery segment.
Russell: We saw the largest growth in our lower income cohorts that are undoubtedly benefiting from the renowned value that we're offering.
Russell: I'd like to highlight our first quarter results through the lens of our MLR hungry for more pillars.
Russell: As you know M stands for most salacious food, we know we have the most delicious food in the industry and are focused on showcasing that with more mouthwatering food photography, and all of our marketing and sales channels.
Russell J. Weiner: From a percentage standpoint, our biggest increases are coming from new labs and light customers. So we're bringing these new customers in. I'm particularly pleased with carry out customers, made possible in part by our reduced $5 minimum spend. Once customers become members, they're redeeming more than ever before, and increases are being seen across all of our channels, delivery. Our new 20 and 40 point redemption tiers are doing exactly what we hoped. These two tiers now combine for the majority of the redemption, and the program has driven incremental profit dollars for franchises.
We also ran a campaign that highlighted our pan pizza, a premium product that brought news to this cross type for the first time since 2014.
And I'm excited to announce that our first product innovation of the year Neurostar pizza launches on air today.
Russell: For New York style came from customers, who prefer a thinner more foldable crust that our traditional hand tossed.
Russell: And we believe that this new cross style will drive incremental occasions.
Russell: We will also drive deliciousness as the Foldable cross lets us focus more on our incredible topics, including a really unique blend of provolone cheese that comes on every New York style Pizza.
Russell J. Weiner: So customers are getting more, and our franchisees have earned more profit. Transcribed by https://otter.ai, We believe Domino's Rewards will continue to be a meaningful sales driver for us in 2021. National promotions are another way we're driving sales. We brought back our carryout special boost week for the first time in January, and its performance exceeded our expectations.
Additionally, this crest option will be available as part of our mix and match offer.
Russell: And Domino's rewards members can redeem 60 points for free medium two topping New York style pizza as well.
Russell: This is another example of how innovation is designed to drive value and more customers into our loyalty platform.
Russell: Oh and hungry for more stands for operational excellence and this is how we will deliver on our promise to have the most delicious food by consistently driving a great experience with our products.
Russell: As I shared on our last earnings call in 2024, we're rolling out a new service program, we're calling more delicious operation.
Russell J. Weiner: Clearly, customers want value, and we are driving it profitably for our friends. Now, as it relates to our promotional cadence in 2024, you can expect it to be consistent with what we did in 2012. Part of that, you can expect around six.
A series of three product training sprints that focused on our DAU, how we build and make our products and how we cook.
Russell: In Q1, we embarked on our first Brent which focused on our Dell and roll this out across all 6800 plus stores in the U S.
Russell: We continue to see benefits from our service initiatives and in Q1, we actually delivered more pizza than we did in Q1 of last year and improved delivery times I am just so proud of our operators.
Russell J. Weiner: As a reminder, these Boost Weeks are a proven customer acquisition tool that drives both short and long-term benefits. And we're seeing the same commitment to providing renowned value internationally. Some of our best performing markets are getting this right. As an example, our Master Franchisee in Mexico has run very successful boosts that have driven outstanding orders and, While providing renowned value through our own channels is one part of our Barbell strategy, tapping into the aggregator marketplace is the other.
Russell: Our third hungry for a pillar is our for now and value.
Speaker Change: I'll expand on what we're now value means to us at Domino's, it's not about just having the lowest price in the market.
Speaker Change: It's about providing value that's innovative and thats memorable.
Speaker Change: We're now value breaks through the sea of sameness discounts that you see in the marketplace.
Speaker Change: Values of buy one get one free.
Russell J. Weiner: Our launch into the aggregator space remains on track to exit the year at 3% or more of sales. Now that we're a quarter into our full launch, I want to share a few insights on what we're seeing. Incrementality has been in line with our expectations. In addition, we're seeing a higher percentage of single user transactions on Uber than we've seen on our own.
Speaker Change: We're now value reinvent this mechanic and creates emergency pizza.
Emergency Pizza performed better than any buy one get one free I've done in my career.
With a meaningful driver to our comps in both Q4 of 'twenty three and in Q1.
Speaker Change: And it not only drove increased orders, but also the acquisition of members into our loyalty program.
Russell J. Weiner: Further, this channel is becoming more promotion promotion. Customer responses to deals are stronger than to everyday low prices. As a result, we are continuing to work to fine-tune our market and our offer. http://TheBusinessProfessor.com We remain focused on driving profitable transactions through Uber, while ensuring that the best values for our customers remain on our own. Everything we do at Domino's is enhanced by our best-in-class franchisees, who are hungry for more stress. We'll be hosting thousands of franchisees for our worldwide rally in May, where we plan to bring our Hungry for More strategy to life across our global market. I can't wait for that gathering, as our franchisees are what makes Domino's. They were the inspiration behind it.
Speaker Change: Dominoes rewards continues to perform extremely well and was the key driver of our strong U S comp performance.
Speaker Change: The program is delivering on our objectives.
Active member growth rates are up significantly since the launch of our new program from a percentage standpoint, our biggest increases are coming from new labs and light customers.
Speaker Change: So we're bringing these new customers into the fold.
Speaker Change: Particularly pleased with the increase in Carryout customers made possible in part by a reduced $5 minimum spend for earning point.
Speaker Change: Once customers become members, they're redeeming more than ever before and increases are being seen across all of our channels delivery and carryout.
Speaker Change: Our new 20% and 40 point redemption tiers are doing exactly what we hoped they are engaging more customers. These two tiers now combined for the majority of the redemptions in Domino's rewards.
Russell J. Weiner: So to close, I couldn't be more excited about 2024 and beyond for Domino's Pizza. Our first quarter results clearly show that our strategy is responding. This gives me great confidence that we can deliver against our short- and long-term hungry-for-more goals and drive significant value creation for our shareholders. With that, I'll turn things over. Thank you, Russell, and good morning, everyone.
Speaker Change: And the program has driven incremental profit dollars for franchisees.
Speaker Change: So customers are getting more than our franchisees have earned more profit.
Speaker Change: Truly a win win.
Speaker Change: We believe Domino's rewards will continue to be a meaningful sales driver for us in 2024 and beyond.
Speaker Change: National promotions or another way, we're driving we're now value.
Speaker Change: In Q1, we brought back our Carryout special boost week for the first time since January 2020.
Sandeep Reddy: Our first quarter financial results demonstrate how powerful our model can be when we drive profitable transactions. The smart pricing we took in 2022 and 2023 has kept us at great value for our customers while being profitable for our friends. This has resulted in profit dollar growth versus 2020 for our US franchisees so far. We remain on track to achieve our target of $170,000 average US franchise store price. Excluding the impact of foreign currency, global retail sales grew 7.3% due to positive U.S. and international comments.
Speaker Change: And this performance exceeded our expectations clearly customers want value and we're driving it profitably for our franchisees.
Speaker Change: Now as it relates to our promotional cadence in 2024, you can expect it to be consistent with what we did in 2019.
Speaker Change: As part of that.
Speaker Change: You can expect around six boost weeks.
Speaker Change: As a reminder, these boost weeks are a proven customer acquisition tool that drives both short and long term benefits for our brand.
Speaker Change: And we're seeing the same commitment to providing we're now value internationally. Some of our best performing markets are getting this right.
Speaker Change: As an example, our master franchisee in Mexico has run very successful boost campaigns that have driven outstanding order and sales growth.
Speaker Change: While providing renowned value through our own channels is one part of our barbell strategy tapping into the aggregated market places the other.
Speaker Change: Our launch into the aggregator space remains on track to exit the year at 3% or more of sales coming through <unk>.
Sandeep Reddy: Global Net Store, U.S. retail sales increased 7.8%, and international retail sales; the impact of foreign currency grew sixfold. You're in Q1. Same store sales for the U.S., so a meaningful increase of 5.5%, and strong comps in the quarter for carryout of 9.5% and delivery of 2.9 were driven primarily by transaction growth from our new loyalty program. This was inclusive of a continued benefit from emergency, and results that exceeded our expectations from the Carriot Special Boost Week that we... We also benefited from 0.9% of price and a 1.4% sales mix. These tailwinds were partially offset by a higher carry-on, but this carry is a lower ticket. We are still evaluating how much of the 1.4% sales mix coming from Uber is incremental. But everything we have seen so far would indicate that it's in line with our approximately two-thirds...
Speaker Change: Now that we're a quarter into our full launch I want to share a few insights on what we're seeing.
Speaker Change: <unk> has been in line with our expectations.
Speaker Change: In addition, we are.
Speaker Change: Being a higher percentage of single user transactions on Uber than we've seen.
Speaker Change: <unk> on our own channels.
Speaker Change: Further this channel is becoming more promotional.
Speaker Change: Customer responses to deals are stronger than to everyday low prices.
As a result, we are continuing to work to fine tune, our marketing spend and our offers to ensure that we are effectively driving this channel.
Speaker Change: We remain focused on driving profitable transactions through Hoover east, while ensuring the best values for our customers remain on our own channels.
Speaker Change: Everything we do at Domino's is enhanced by our best in class franchisees the E and are hungry for more strategy.
Speaker Change: We will be hosting thousands of franchisees for our worldwide rally in May where we plan to bring our hungry for more strategy to life across our global system.
Speaker Change: I can't wait for that gathering is our franchisees are what makes domino's so special.
Speaker Change: Where the inspiration behind hungry for more.
Speaker Change: So to close I couldnt be more excited about 2024 and beyond for Domino's Pizza, our first quarter results clearly show that our strategy is resonating with customers.
Sandeep Reddy: Shifting to unit count, we added 20 net new stores in the U.S., in line with our expectations, bringing our U.S. system stroke out to six... Moving to international, where results were generally in line with our expectations for same-store sales, excluding foreign currency imports. Store counts increased by 144 net stores, which is an increase over the 106 we opened in Q1. Income from operations increased 19.4% in Q1, excluding the negative impact of foreign currency of 1.4 million dollars.
This gives me great confidence that we can deliver our against our short and long term hungry for more goals and drive significant value creation for our shareholders with that I'll turn things over to Sandy.
Sandy: Thank you Russell and good morning, everyone.
Sandy: Our first quarter financial results demonstrate powerful model can be when we drive profitable transaction growth.
The smart pricing, we took in 2022 and 2023.
Sandy: Has kept us at a great value to our customers in 2024, while being profitable for our franchisees.
Sandeep Reddy: This increase was primarily due to higher Global Franchise Royalty Rates, resulting from global retail sales growth of 7.3%, as well as higher supply chain gross margins due to procurement product, decreasing the cost of our food basket and slightly lower delivery costs. I also wanted to call out that our margin rate benefited by about 0.3% in Q1, due to the check fee being at $0.395, and the lower ad fund contribution rate of $5.75 billion.
This has resulted in profit dollar growth versus 2023 for our U S franchisees so far this year.
Sandy: We remain on track to achieve our target of $170000 average U S franchise store profit for 2024.
Sandy: Excluding the impact of foreign currency.
Global retail sales grew seven 3% due to positive U S and international comps and global net store growth.
Sandy: U S retail sales increased seven 8% and international retail sales, excluding the impact of foreign currency grew six 8%.
Sandeep Reddy: Now turning to our outlook, which remains in line with what we previously shared. 7% or more global retail sales growth, excluding the impact of foreign currency, and we continue to expect the following. 2024 U.S. Comp to be above the 3% plus long-term guide as a result of our expected cap on Uber and Loyalty for the full year, and we expect comps to be 3% or more each quarter for the remainder of... Specific to Q2.
Sandy: During Q1 same store sales for the U S. So meaningful increase of five 6%.
Sandy: Our strong comps in the quarter for Carryout of nine 5% and delivery of two 9%.
Sandy: Were driven primarily by transaction growth.
As Russell mentioned in his remarks, the increase in U S. Same store sales was driven by transaction growth from our new loyalty program.
Sandy: This was inclusive of a continued benefit from emergency pizza.
Sandy: And results that exceeded our expectations from the carrier special boost week that'd be ramp.
Sandeep Reddy: We expect them to be slightly below Q1 on a one-year... As the emergency pizza promotion rolls off... partially offset by a ramp, you can expect a similar national promotion cadence to what we ran in Q1 in terms of our activity. Consequently, the April Carriot Special Boost, that is now behind us. Sales for Uber are expected to increase throughout the year as marketing and awareness increase, and we are expecting to exit the year with an overall sales mix of 3% or more.
Sandy: We also benefited from 0.9% of pricing.
Sandy: A one 4% sales mix from Uber.
Sandy: These <unk> were partially offset by a higher carrier mix, which carries a lower ticket and delivery.
Sandy: We assume evaluating how much of the one 4% sales mix coming from Uber is incremental.
Sandy: But everything we've seen so far would indicate that it's in line with our approximately two thirds estimate.
Sandy: Shifting to unit Count we added 20 net new stores in the U S.
Sandy: In line with our expectations, bringing our U S system store count to 68 74.
Sandy: Shifting to international where results were generally in line with our expectations same store sales, excluding foreign currency impact increased 049 percent in the first quarter.
Sandeep Reddy: International comps are expected to remain soft in the first half of the year due to a continuation of the trends we saw at the end of last year, but we expect them to accelerate to 3% or more long-term guidance in the back half of the year. Now shifting to Net Stores, where we continue to expect $1100 or more, which will be driven by $175 and 925. We continue to expect an 8% or more year-over-year increase in operating income, excluding the impact of foreign currency. To highlight some of the components which remain undefined,
Sandy: Store comps increased by 144 net stores, which is an increase over the 160 opened in Q1 of 2023.
Sandy: Income from operations increased 19, 4% in Q1.
Sandy: Excluding the negative impact of foreign currency of $1 4 million.
This increase was primarily due to higher global franchise royalty revenues, resulting from global retail sales growth of seven 3%.
Sandy: As well as higher supply chain gross margins due to procurement productivity.
Sandy: The decrease in the cost of our food basket and slightly lower delivery cost.
Sandy: I also wanted to call out that our margin rate benefited by about <unk>, 3% in Q1.
Sandeep Reddy: Expect operating income margins to be relatively flat compared to 2020. As a reminder, we are not expecting to see cost leverage in 2024 due to the investments we are making in consumer technology, store technology, and supply chain capacity to support future sales growth. We are expecting our GNA as a percentage of retail sales to be approximately 2.4%. This is inclusive of approximately $9 million in timing of GNA spend in Q2, driven by a worldwide rally which takes place every two years. We are expecting supply chain margins to be roughly flat compared to the prior year.
Sandy: From the tech fee being at 39 five.
Sandy: And the lower AD fund contribution rate of 575%.
Sandy: Now turning to our outlook, which remains in line with what we previously shared.
Sandy: 7% of all global retail sales growth, excluding the impact of foreign currency and we continue to expect the following.
Sandy: First.
Sandy: 2024 U S comps to be above the 3% plus long term guide as a result of our expected catalyst and Uber and <unk> for the full year, and we expect comps to be 3% or more in each quarter for the remainder of the year.
Sandy: Specific to Q2, we expect them to be slightly below Q1 on a one year basis.
Sandy: <unk> see pizza promotion rolls off Paul.
Sandy: Actually offset by a ramp going over.
Sandeep Reddy: Incorporating an inflationary food basket for the rest of the year, with a full year range of up 1%. Should our food basket pricing for the year move to the lower end of our expectations, we may see modest leverage in operating and supply chain margins. Thank you. We will now open the line for questions. Please take a moment for our first question.
Sandy: You can expect a similar national promotions cadence to what we ran in Q1 in terms of our activity.
Inclusive of the April Carryout special boost week that is now behind us.
Sandy: Second.
Sandy: Sales to increase throughout the year as marketing and awareness increases and we are expecting to exit the year with an overall sales mix of 3% or more.
Andrew Michael Charles: Our first question comes from the line of Andrew Charles from TD Cowan. Your question, please? Great, thank you. Question first on same store sales, just you know, one Q is 5.6%. Obviously, a very impressive number.
Sandy: Third.
Sandy: International comps to remain soft in the first half of the year due to a.
Sandy: Continuation of the trends we saw at the end of last year, but expect them to accelerate to 3% on a more long term guidance in the back half of the year.
Sandy: Now shifting to net stores, where we continue to expect 1100 or more which will be driven by 175 in the U S and 995 and international.
Russell J. Weiner: We think it has the high watermark for 2024 US same-store sales. You talked about how 2Q will sequentially moderate partially, given the benefit of emergency pizza rolls off, while Uber eats, you know, picks up. But, you know, just curious, do you think this performance, though, is broadly sustainable as we think about the remainder of 2024? Morning, Andrew.
We continue to expect an 8% year over year increase in operating income excluding the impact of foreign currency.
Sandy: To highlight some of the components, which remain unchanged.
Sandy: Expect operating income margins to be relatively flat compared to 2023.
Sandy: As a reminder, we are not expecting to see cost leverage in 2024 due to investments we are making in consumer technology store technology and supply chain capacity to support future sales growth in the U S.
Russell J. Weiner: Thanks. Thanks for the call. You know, part of the reasoning for putting out 3% or more as part of a hungry for more algorithm is that 3% for us is the floor, but we're going to do everything we can, you know, to beat that and deliver more every single quarter. And so I'm not going to get into forward looking for the quarters.
Sandy: We are expecting our G&A as a percentage of retail sales to be approximately two 4%.
Sandy: This is inclusive of approximately $9 million and timing of G&A spend in Q2, driven by a worldwide rally, which takes place every two years.
Russell J. Weiner: But what I will say that I really liked about this quarter is, you know, there are two things I look at. I look at results and I look at repeatability. And the results, like you said, were strong. What I then look at is, okay, were the components that drove those results repeated?
Sandy: We are expecting supply chain margins to be roughly flat compared to the prior year.
Sandy: Incorporating an inflationary food basket for the rest of the year with a fuller range of up 1% to 3%.
Russell J. Weiner: When you think about our Hungry for More platform, we have product news. First quarter, we've got our first new product of the year and second. We talk about operational excellence. We delivered more pizzas in Q1 than we did in Q1 last year, at a better delivery time. Our renowned value, you know, we went to the second half of emergency pizza in Q1, we had a carryout goose week, and you probably read we just put out a new renowned value promotion called UTIP wheat. And so, and as Sandeep said earlier about the smart pricing we took, that's part of driving the consistent order kind of increase across every segment.
Sandy: Should our food basket pricing for the move to the lower end of our expectations, we may see modest leverage in operating and supply chain margins.
Speaker Change: Thank you we will now open the line for questions.
Speaker Change: Certainly one moment for our first question.
Speaker Change: Our first question comes from the line of Andrew Charles from TD Cowen Your question. Please.
Andrew Michael Charles: Great. Thank you.
Andrew Michael Charles: First on same store sales just <unk> five 6%, obviously very impressive number up to suffer or should we think of that as the high watermark 124 U S. Same store sales you talked about her QQ will sequentially moderate partially given the benefit of emergency pizza rolls off <unk> picks up but just curious do you think.
Dennis Geiger: Thank you. And our next question comes from the line of Dennis Geiger from UBS. Your question, please. Great. Thanks, guys. And congrats on the quarter. Sandeep, wondering if you could talk a little bit more about supply chain margin and sort of the overall operating margin strength that you saw in the quarter, and perhaps anything more on the latest thoughts on full year. You gave color on the quarter.
Andrew Michael Charles: Performance, though is broadly sustaining as we think about the remainder of 2024.
Speaker Change: Good morning, Andrew Thanks, Thanks for the call.
Speaker Change: Part of the reason for putting out 3% or more as part of our hungry for more algorithm is at three.
Andrew Michael Charles: <unk>, 3% for US is the floor, but we're going to do everything we can to beat that and deliver more every single quarter.
So I'm not going to get into forward looking on the quarters, but what I will say that I really liked about this quarter is there.
Sandeep Reddy: You just talked about reiterating your thoughts for the full year. Anything more if you could kind of break down that procurement benefit, perhaps, maybe what you saw in deflation in the quarter itself for the supply chain and, you know, anything on that go forward procurement, etc., as we think about the full year? Thank you. Thanks, Dennis.
Andrew Michael Charles: Two things I look at I look at results and I look at repeat ability.
Andrew Michael Charles: And the <unk> like you said were strong when I, then look at it and say okay. What are the components that drove those results are those repeatable.
Andrew Michael Charles: And when you think about are hungry for more platform, we had product news.
In first quarter, we've got actually our first new product of the year in the second quarter we.
Sandeep Reddy: And I think that's a great question. Because if you really go back to our fourth quarter call, Dennis, we talked about our expectations for the first quarter to be really big, and Modern Expansion. Directionally, it was slightly more, and I'll get to that.
We talk about operational excellence, we delivered more pizza in Q1 than we did Q1 last year at a better delivery time.
Andrew Michael Charles: Our <unk> value. We we went to the second half of emergency Pizza in Q1, we had a carryout boost weekend you probably read we just put out a new round value promotion called Youtube we tip.
Andrew Michael Charles: So and as Sandeep said earlier about the smart pricing, we took it that's part of it.
Sandeep Reddy: But I think overall, when we look at the full year, our expectations really have... We were expecting Procurement Productivity Benefits for the whole year, and we were expecting to make investments that offset the procurement productivity. What we did see specifically in Q1 is that while we got the procurement product... Some of the investments we are planning to make in supply chain capacity are really pushed out into later. And so, directionally, I think that's the way to think about supply chain margins.
Andrew Michael Charles: Driving that consistent order count increase across every segment and consumer of our business and so while I can't get into the specifics what I can tell you is the repeatability of the MLR R. E. Formula is what we're going to be leaning into.
Speaker Change: Thank you.
And our next question comes from the line of Dennis Geiger from UBS. Your question. Please.
Dennis Geiger: Great Thanks, guys and congrats on the quarter.
Sandeep Reddy: Now, when I talk about the full-year expectations... Included in that was a timing factor for GNAs. We already messaged on the last call that we've quantified it a little bit for you to have a better understanding of what's going on. And other than that, the back half really remains relatively unchanged. Similar to what we said in the fourth quarter call. Broadly, not very different. Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES Thank you.
Sandy I'm wondering if you could talk a little bit more about supply chain margin in sort of the overall operating margin strength that you saw in the quarter and perhaps anything more on the latest thoughts on full year. I know you gave color on the quarter you just talked about reiterating your.
Dennis Geiger: Your thoughts for the full year anything more if you could kind of break down that procurement benefit perhaps.
Dennis Geiger: Exactly maybe what you saw inflation deflation in the quarter itself for the supply chain and anything on that go forward procurement et cetera, as we think about the full year. Thank you.
Brian John Bittner: And our next question comes from the line of Brian Bittner from Oppenheimer. Your question, please. Thanks. Good morning.
Speaker Change: Thanks Dennis.
Russell J. Weiner: Your same store sales in the US accelerated in the first quarter, about 300 basis points from 4Q. Can you just talk about how much of that acceleration was traffic, all the acceleration traffic? And it sounds like one of the biggest drivers of the strong comps is the rewards program. That's what you seem to be citing the most. And I realized 2Q may be a little lower than 1Q.
Speaker Change: And I think Thats a great question, because if you if you really go back to our fourth quarter call that as we talked about our expectations for the first quarter to be really margin improvement and margin expansion, which we did see.
Speaker Change: And Directionally it was slightly more and I'll get to that in a second.
Speaker Change: But I think overall when we look at the full year, our expectations really haven't changed.
Speaker Change: We were expecting to see procurement productivity.
Russell J. Weiner: But in general, can you just unpack why you believe the rewards program and all the improvements that you've made there can be an ongoing driver for sales trends, not just in 2024 but how it can build on itself in 25. Thanks. Good morning, Brian.
Speaker Change: Productivity benefits for the whole year, and we were expecting to make investments that offset the procurement.
Speaker Change: The procurement productivity, what we did see specifically in Q1 is that while we got the procurement productivity.
Speaker Change: Some of the investments we are planning to make and supply chain capacity really pushed out into later in the year. So Q2 to Q4 gets a little bit more pressured as a result of it but the overall year to date Hasnt changed.
Russell J. Weiner: If you want results, I think you nailed it. What makes me so proud of them is that they were order counts. There were account-driven overall; there were account-driven on our delivery business, on our carry out business across the different segments we've got. And I think that's something special in general, let alone, you know, given the current environment, you know, for us. Rewards certainly was a big part of it and will be a tailwind for us, driving activity with folks that maybe we didn't engage as much in the old program. So the carryout customer engagement is much higher than it was before, and light users are much higher.
Speaker Change: And so directionally I think thats the way to think about supply chain margins and where we expect to take that.
Speaker Change: Now when I talk about the full year expectations included in that was a timing factor on G&A specific to Q2, because we have our worldwide rally we had already messaged over the last call that we would expect to see some compression, but we've quantified a little bit for you to help you with your modeling.
Speaker Change: And other than that the back half revenue remains relatively similar to what we said in the fourth quarter call and so.
Speaker Change: Broadly not a very different picture on the P&L than what we saw back in February.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Brian Bittner from Oppenheimer. Your question. Please.
Brian John Bittner: Thanks, Good morning.
Your same store sales in the U S accelerated in the first quarter about 300 basis points from <unk> can you just talk about how much of that acceleration was traffic was all the acceleration traffic.
Russell J. Weiner: And so that gives you a little bit of a sense of where that growth is coming from, and I don't expect the tailwind from loyalty to go away. Thank you. And our next question comes from the line of Sara Senatore from Bank of America. Your question, please, is particularly high relative to history, but 2019 was a bit of a slower comp year for Domino's.
Brian John Bittner: And it sounds like one of the biggest drivers of the strong comps are the rewards program. That's what you seem to be citing the most and I realize that <unk> may be a little lower than <unk>, but in general can you just unpack why you believe the rewards program and all the improvements that you've made there can be an ongoing drive.
Sara Harkavy Senatore: And so I just wanted to kind of understand, you know, how you're thinking about the implications on same-store sales from promotional intensity and the potential for, you know, competitors to match. Thank you. Thanks, Sara. I'll try to get to each piece of that, unpack it a little bit.
Brian John Bittner: Or for sales trends not just even in 2024, but how it can build on itself in 'twenty five.
Speaker Change: Sure Good morning, Brian.
Speaker Change: The Q1 results I think you nailed it what makes me so proud of the team.
Russell J. Weiner: I think, you know, what we talked about that we're seeing in 3P is definitely a high-low value-driven business, and what we're doing is we're kind of adjusting accordingly. The important thing to remember is the best price is for consumers, and our loyalty program is always going to be on our own channels. But it's interesting, though, when you look at what's going on in 3P.
Speaker Change: Is that they will order count shred it.
Speaker Change: There are account driven overall there are account driven on our delivery business on our carryout business across the different segments, We've got and I think thats something special in general let alone given the current environment for <unk>.
Speaker Change: The rewards certainly was a big part of it and will be a tailwind for us as we continue.
Russell J. Weiner: I think that this really exacerbates the difference between what we're doing on our own... So there it is price, it's this percent off, you're giving this away free, up and down. What we're doing out there, which is why I think... You know, it feels like, and you said this, you know, it feels like there are more promotions out there. It's the difference between value and renown value.
Speaker Change: This year and for the next few years I mean, we saw this the first time, we launched our loyalty program. It was time to reinvent it and we did the nice thing about the reinvented program as it's driving.
Speaker Change: Activity with folks that maybe we didn't engage as much in the old program and so that carryout customer engagement.
Speaker Change: Engagement is much higher than it was before light users are much higher than they were before.
Russell J. Weiner: I talk to the team a lot, bringing the talk to value. So it's top value versus bottom. And so the promotions may feel that we're doing out there may feel like the activity has increased. But I think what has increased is just their power. And like I said, a BOGO versus a buy one versus emergency pizza or a $3 bounce back for purchase in a week versus U-Tip We-Tip. They just feel more powerful because the talk value is there, and I think that's a great juxtaposition, understanding how we're going to break out from both three and the rest of QSR. And I'm just going to add something, Sara.
And so that gives you a little bit of a sense of of where that growth is coming from and I don't expect the tailwind from from loyalty to go away anytime soon.
Speaker Change: Thank you.
Speaker Change: And our next question comes in line of Sara Senatore from Bank of America. Your question. Please.
Thank you I wanted to ask about the promotional environment I guess, a couple of things. One is I know you mentioned that <unk> is more promotional.
Sara Harkavy Senatore: I think the appeal for pizza had been that it was more margin neutral or maybe even accretive.
Sara Harkavy Senatore: Yes, maybe the absence of a deal I'm just curious if that's still going to be the case and then as you think about the promotional cadence consistent with 2019, I think implication with that.
Sandeep Reddy: Sometimes when you talk about promotion, this uptick... What is great for us is profit dollar growth of 5% or more for the year. And, and we're doing exactly what we hope for. And, and I think on the last call, you asked about profit dollar growth versus margin expansion. Unknown Executive, Nerses Setyan, Danilo Gargiulo, Cynthia Headen, Domino's Pizza Inc.
Sara Harkavy Senatore: All I can say is not particularly high relative to history, but 2019 was a bit of a slower comp year from Domino's and so I just wanted to kind of understand how youre thinking about the implications.
David Sterling Palmer: Thank you. And our next question comes from the line of David Palmer from Evercore ISI. Thanks, good morning.
Sara Harkavy Senatore: On same store sales from promotional intensity and the potential for competitors to match. Thank you.
Russell J. Weiner: I was hoping maybe we could drill down into just the labor situation for Domino's as you see it across not just your company stores and supply chain but also the franchisees, you know, any metrics you can share that could speak to how labor availability is impacting the business, both sales and margins. Thanks. Maybe I'll take a look at the big picture and send it, talk about it later.
Speaker Change: Thanks, Sara I'll try to get to each piece of that unpack it a little bit.
Speaker Change: What we talked about that we're seeing on three P is definitely a high low value driven.
Speaker Change: Business and what we're doing is we're kind of adjusting accordingly.
Russell J. Weiner: I mean, David, the biggest indicator to me about both labor availability and, frankly, the improvements that we're driving operationally is the fact that we delivered more orders in Q1 than we did last year at better delivery. So if labor was an issue, you know, we wouldn't be able to do that. And obviously, the flow through the profitability front. Sandeep spoke about that a little bit. And so that, to me, should be a takeaway that it is working. Yeah, no, I think, uh... Russell's exactly right. I think accessing labor has not been a problem.
Speaker Change: The thing to remember is the best prices for consumers and our loyalty program, we're always going to be or on our own channels.
But it is interesting, though when when you look at what's going on in <unk> I think that.
Speaker Change: Really exacerbates the difference between what we're doing on our own channels.
Speaker Change: So there its price.
Speaker Change: It's this percent off you've given this this away free up and down what we're doing out there which is why I think.
Speaker Change: It feels like and you said that it feels like they're more promotions out there is the difference between value and renown value.
Speaker Change: I talked to the team a lot.
Speaker Change: When we think about what we are now in value means it means bringing the talk to value. So.
Sandeep Reddy: What I do think is reality and... Well, there is some wage pressure. But I think specifically California is a good example, right, where we have... So we essentially would have had to increase our prices in California. Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com. But overall, we're solving for profit dollar growth. That's what we are always solving for to protect that Franchisee Profitability in California. Margin percentages are good to look at.
Speaker Change: So, let's talk value versus value and so the promotions may feel that we're doing out there may be feeling like there. The activity has increased I think what has increased is just the power.
Speaker Change: Of them and like I said, a bogo versus a buy one.
Speaker Change: But versus emergency pizza or.
Speaker Change: $3 bounce back in for purchase in a week.
Speaker Change: <unk> versus <unk> <unk>.
Speaker Change: I just feel more powerful because the talk value is there and I think that's a great just to position understanding how we're going to break out from both <unk> and the rest of <unk> with the promotions that we do.
Russell J. Weiner: The ex-marketer in me needs to follow up with that, you know, there are two profitability metrics that we care about, you know, at Domino's Pizza because we know if we balance those, our profit follows, and certainly the franchisee profitability. But the other is the profitability for every American out there, every pizza buying citizen, you know, kind of all over the world. And that is where I come from. You know, our record of smart prices, call it 15 years of doing so, has proved out. We had the $5.99 mix-and-match offer for 12 years. Profits went up. The order was cancelled.
Speaker Change: And I'm, just going to add some things because I think sometimes when we talk about promotion. This uptick is what's happening to profitability.
Speaker Change: It's great for us as a profit dollar growth continues to grow as we expected. It to we are on track to the $170000 or more for the year.
Speaker Change: And we are doing exactly what we hoped for and I think on the last call you asked about our profit dollar growth versus margin expansion, even on the corporate stores, we saw a very healthy profit dollar growth.
Speaker Change: And we did see a bit of margin expansion, but we're not solving for a margin expansion. We're solving for profit dollar growth and and I think what we're seeing is very healthy that way all business claims with the P&L.
Russell J. Weiner: We took Smart Pricing, and Smart Pricing is based on lots of analytics around what the competition is doing what's going on with... https://www.youtube.com.uk We're seeing how that's translated into order counts. The way I think about it, every year.
Speaker Change: Thank you and our next question comes from the line of David Palmer from Evercore ISI.
Speaker Change: Thanks.
David Sterling Palmer: I was I was hoping maybe we could drill down into just the labor situation for Domino's as you see it across not just your company stores and supply chain, but also the franchisees any.
Russell J. Weiner: Should the analytics say we can stay with $6.99? We get more and more in value. And so when you balance.
David Sterling Palmer: Any metrics you can share that could speak to how.
David Sterling Palmer: Labor availability is impacting the business both sales and margins.
Lauren Danielle Silberman: Consumer Profitability and Franchisee Profitability, you get Q1. Thank you. And our next question comes from the line of Laura Silberman from Deutsche Bank. Your question, please. Thanks so much.
David Palmer: <unk>.
Speaker Change: Maybe I'll talk Big picture and Sandeep you can you can talk on the margin level I mean, David.
Speaker Change: The biggest indicator to me about both labor availability and frankly, the improvements that we're driving operationally is the fact that we delivered more orders in Q1 than we did last year at better delivery times and so if labor was an issue we wouldn't be able to do that and obviously the flow through to profitability.
Russell J. Weiner: Congratulations on the quarter. You talked about the strong performance across income cohorts. Can you expand on what you're seeing with the consumer and whether there are any observable differences in how consumers across cohorts are using the brand, and then any changes in consumer behavior that indicate signs of a tree down within each channel? Thank you. Sure. You know, we talked, I think, Laura, in Q4, even maybe in Q3, a little bit about what we thought was coming in 2024.
Sandeep spoke about that a little bit and so that to me should be a takeaway that.
Speaker Change: That is working right now.
Sandeep Reddy: Yes, I think.
Sandeep Reddy: Russell is exactly right I think accessing labor has been.
Sandeep Reddy: Not a problem at all as we've moved through the year.
Sandeep Reddy: What I do think as we are a reality and we talked about this on the last call as well as there is some wage pressure in the year with some minimum wage increases statutory increases.
Sandeep Reddy: That will impact a franchisee P&L that even our corporate store P&L.
Sandeep Reddy: But I think specifically, California is a good example, where we are.
Sandeep Reddy: <unk> 2008.
Sandeep Reddy: Reed's increases.
Sandeep Reddy: So we essentially would have it too.
Russell J. Weiner: And that is coming to fruition. Traffic is hard to come by, orders are hard to come by in the QSR. To see that continue throughout the year, I don't think that's going to be the case, you know, at Domino's, because of what we talked about before. And the traffic doesn't just come; it becomes, like I said before, results are important if they're repeatable, and they're repeatable if there's a formula.
We have to increase our prices in California to address the wage increases that we saw over there are price increases probably in the high single digits, but we will modify it if we need to actually.
Sandeep Reddy: Adjust to what the competitors are doing but overall, we're solving for profit dollar growth that's work beyond <unk> four we.
Sandeep Reddy: We're looking to protect that franchisee profitability in California and throughout the system and so margin percentages are good to look at and maintain good flow through might be solving for dollar growth.
Next marketer and we need to follow up with that there are two there are two profitability that we care about a dime.
Sandeep Reddy: <unk> pizza, because we know if we balance those are profit follow them certainly the franchisee profitability is a lot of them, but the other is the profitability for every American out there every pizza buying citizen.
Sandeep Reddy: All over the world.
Sandeep Reddy: And that is where I think our record of smart pricing, which has been call. It 15 years of doing so.
Russell J. Weiner: And essentially, you know, our pricing is stable and right, our promotional context or promotions have come back, carryout special, we brought that back. A new product. I think the key thing, though, when you're talking about why is every income cohort.
Sandeep Reddy: Has proved out I mean, we had the $5 99 mix and match offer for for 12 years.
Profits went up order count went up.
Sandeep Reddy: We took smart pricing and smart pricing is based on a lots of analytics around what the competition's doing what's going on with <unk>.
Russell J. Weiner: Engaging customers with positive orders. And a big piece of that is the new loyalty program, specifically designed to tap in. So reducing the purchase from $10 to $5, well, all of a sudden, this is a much more compelling program for carryout customers and just customers in general who, you know, don't want to spend a lot of money. At five bucks, they get points.
In consumers' wallets, and we took pricing and thats pretty much the majority of at least promotional pricing, we've taken already and Youre seeing how that's translated into order count growth.
Sandeep Reddy: And the way I think about it is every year.
Sandeep Reddy: Should the analytics. They say, we can stay with $6 99, as an example, we get more and more in value and so when you balance consumer profitability on franchisee profitability you get Q1.
Thank you.
Russell J. Weiner: And the other thing is, 20 and 40 point levels, adding those, those redemption levels, to our loyalty program has been key in driving frequency among customers with lower income and lower frequency. Customers The amazing thing to me, do you think by the old program? which was only 60 points for a medium two topping pizza. The new program, the 20 point and the 40 point level, are actually higher than the 60 point level.
Sandeep Reddy: And our next question comes from the line of Laura Silbermann from Deutsche Bank. Your question. Please.
Lauren Danielle Silberman: Thanks, so much congrats on the quarter you talked about the strong performance across income cohort can you expand on what youre seeing with the consumer and whether there were any observable differences.
Barry Crosstown: Hey, Barry Crosstown walk or using the brand and then any changes in consumer behavior signs that you pay down within each channel. Thank you.
Barry Crosstown: Yes.
Barry Crosstown: Sure.
Barry Crosstown: We talked I think Laura.
Barry Crosstown: In Q4, even in maybe in Q3, a little bit about what we were we thought was coming in 2024 and that is coming to fruition.
Speaker Change: Traffic is hard to come by orders are hard to come by in the <unk> I think youre going to see that continue throughout the year I don't think thats going to be the case.
Danilo Gargiulo: And so that gives you a sense of why we're breaking through in every cohort across the country. Thank you. And our next question comes from the line of Danilo Gargiulo from Bernstein. Your question, please. Thank you. Congress, again, in the quarter.
Speaker Change: Windows because of what we talked about before and the traffic doesn't just come it becomes it's like I said before.
Speaker Change: Results are our important if they are repeatable and they're repeatable, if theres a formula and essentially.
Russell J. Weiner: I was wondering if you could elaborate on what is causing international markets to have a little bit more compressed growth this quarter, which was in line with your previous expectations, and particularly, if you could elaborate, if you have been able to estimate how the pressure from the tension in the Middle East is impacting you specifically, and more broadly, if you can take any lessons from the domestic markets that are growing so fast, and you can transfer them over to the international Thank you. Thanks. Well, you both asked and answered the question. So a great job. Yeah, no, look, Q1 comps were in line with our expectations to see pressure in Europe.
Speaker Change: Our pricing is stable and right our promotional context, our promotions have come back Carryout special what we brought that back.
Speaker Change: Our new products.
Speaker Change: I think the key thing, though when you when you were talking about why is every income cohort engaging in Domino's with positive order count is a big piece of that is the new loyalty program.
Speaker Change: We specifically designed it to tap into.
Speaker Change: Consumers that we hadn't done before so reducing the purchase from $10 to $5. While all of a sudden this is a much more compelling program for carryout customers and customers in general who.
Speaker Change: I don't want to spend a lot of body at five bucks they get points and the other thing is the 20% and 40 point levels, adding those those redemption levels.
Russell J. Weiner: You know, Sandeep talked about this last time, the Middle East represents a relatively small percentage, less than 3% of our, you know, operating. But what makes us continue to expect comps to return to our 3% algorithm in the back half? That's exactly what you were saying. We see key markets starting to bring to life the hungry for more strategy. So if you look at Australia, for example, they launched a campaign that literally is called MORE in Q4 that really is romance is a product. P1 of 12.2%.
Speaker Change: To our loyalty program has been key in driving frequency among.
Speaker Change: Kind of lower income and lower frequency customers. The amazing things that maybe you think about the old program, which was only 60 points for a medium two topping pizza.
Speaker Change: Our.
Speaker Change: New program, the 20 point in a $40 level actually combined are higher than the 60 point level and so that gives you a sense of.
Speaker Change: Why we're breaking through in every cohort across delivery and Carryout.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Daniel Guardiola from.
Danilo Gargiulo: Bernstein Your question please.
Danilo Gargiulo: Congrats again on the quarter.
Danilo Gargiulo: I was wondering if you can elaborate on what is causing the international market to have a little bit more compressed growth this quarter, which again was in line with your previous expectations and particularly if you can elaborate.
Russell J. Weiner: They launched Domino's Mania, which is a boost week. And so what we're starting to see is that folks are starting to follow this playbook. We're starting to work internationally in our jobs, and that's part of why we have this rally....continue to share these best practices. And that's why, you know, in the back half of the year, we think we'll return...
Danilo Gargiulo: Being able to estimate how the pressure from the pension and immediately having asking you specifically and more broadly if you can take any lessons from the domestic markets outgrowing surpassed and you can trust them over to the international market.
Yes.
Speaker Change #101: Thanks, well you both asked and answered the question so great job.
Speaker Change #102: Yes, no look at Q Q1 comps were in line with our expectations, we continue to see pressure in Europe and middle East.
Gregory Ryan Francfort: Thank you. And our next question comes from the line of Gregory Francfort from Guggenheim. Hey, thanks for the question. Um, Russell, you made a comment about the third-party channel having more single item orders. And I think the reason for why you expected sales to build as you move through the year was because you were still figuring out how to promote on the platform. I'm curious, what do you think has been working?
Speaker Change #102: Sandeep I talked about this last time.
Speaker Change #102: The middle East represents a relatively small percentage less than 3% of our operating income, but what makes us continue to expect comps to return to our 3% algorithm in the back half.
Is exactly what you were saying, we see key markets starting to bring to life. The hungry for more strategy. So if you look at Australia. For example, they launched a campaign that literally is called more.
Speaker Change #102: In in Q4 that really does romances products and they've had.
Delicious new products that have launched as part of that their business has responded accordingly.
We looked at a Mexico I talked about them a little bit. They just reported Q1 of 12, 2%.
Russell J. Weiner: And what do you think still needs to be tweaked to kind of get you to where you want to be as you exit the year from a mixed perspective in terms of pricing and promotional structure? Yeah, Greg, we, like I said, things are a little bit different on the platform than they were last year. The promotional competition. It's just up, but we're still sticking to our strategy there of best pricing online at Domino's. It's just more about how we manage it. So, for example, your base price could be higher if you want to discount it a little bit more. I mean, all of that stuff is available to us.
Speaker Change #102: They launched Domino's mania, which is a boost weak and so what we're starting to see is as folks follow this playbook.
Speaker Change #102: It's starting to work internationally and our job and that's part of why we have this rally coming up is to continue to share. These.
Speaker Change #102: These best practices and Thats why.
Speaker Change #102: At the back half of the year, we think we'll return to the three three plus algorithm.
Speaker Change #102: Thank you and our next question comes from the line of Gregory Frankfurt from Guggenheim. Your question. Please.
Gregory Ryan Francfort: Hey, Thanks for the question.
Gregory Ryan Francfort: Russell you made a comment about just the third party channel, having more single item orders and I think the reason for why you expected sales to build as you move through the year was because you were still figuring out how to promote on the platform.
Speaker Change #103: Curious what do you think it's been working or what do you think still needs to be tweaked to kind of get you to where you want to be as you exit the year from a mix perspective in terms of pricing and promotional structure.
John William Ivankoe: And so we feel good about kind of the way our team is handling that. We're promoting it on the Uber channel. Uber is promoting us on the Uber channel. Thank you. And our next question comes from the line of John Ivankoe from JPMorgan. Your question, please. Hi, thank you. In the context of third-party delivery, maybe being a little bit more promotional, I was hoping you could put that in the context of your own delivery fee. We've actually seen some stores where they can be as high as $7.99. I think that's a New York example, but it's still an example.
Russell: Yes, Greg we have like I said things are a little bit different on the platform than they were last year.
Russell: Competition, the promotional competition it shows up but we're still sticking to our strategy there of best pricing online at Domino's.
Russell: It's just more about how we manage it. So for example, your base price could be higher if you wanted to discount a little bit more.
Russell: All of that stuff is available to us and so we feel good about.
Russell: Kind of the way our team is handling that we're promoting on the Bluebird channel Uber is promoting us on the Bluebird channel Sandy.
Russell: Sandeep talked about we're at one 4% of sales, which is up from four in Q4 and all of that.
Russell J. Weiner: How do you feel about the current structure of the relatively fixed delivery fee, no matter how much a customer orders, if there's any opportunity to look at that over time? When I think consumers increasingly look at the total landed cost of that delivery, if you feel the overall algorithm is still in the right place? Obviously, I understand orders being up year over year might just simply answer that question, but just wanted to get your thought on just the delivery fee overall in terms of consumers' value perception.
Russell: It makes me really confident that we're going to get to that 3% exit rate for the year.
Speaker Change #104: Thank you.
Speaker Change #104: Next question comes from the line of John <unk> from J P. Morgan Your question. Please.
John: Hi, Thank you.
John: The context of third party delivery, maybe being a little bit more promotional I was hoping if you could put that in the context of your own delivery fee, we've actually seen some stores, where it can be as high as 799, I think Thats a New York example, but it's still an example.
Russell J. Weiner: Thank you. Yeah, yeah, thanks, John. You know, we do price scraping on a site called https://www.youtube.com.uk, whose pricing is probably a little bit lower than when you're right, though, on aggregator, so that people may sign up for programs where delivery may be reduced in cost or free, but at the end of the day, particularly our customers, are looking at exactly what you said. You probably don't call it total landed cost; they just call it, is it a bargain, is it a value, and as long as we're doing that, we're aligning competitively with the local competition through our pricing there, and we've got the best pricing on dominoes.com.
John: How are you feeling about the current structure of the relatively thick delivery fee no matter, how much customer orders, if theres any opportunity to kind of look at that over time and when I think consumers increasingly look at the total landed cost of that delivery. If you feel the overall algorithm.
John: Still in the in the right place and obviously I understand orders being up year over year might just simply answer that question, but just wanted to get your thought on just delivery fee overall in terms of consumers value perception. Thank you.
Speaker Change #105: Yes, yes, thanks John.
Speaker Change #106: Do price scraping.
Speaker Change #107: I think either weekly or biweekly basis on delivery fee and so what's important to understand is the recommendations to our franchisees are based on the competitors that are out there.
Chris O'connell: That's the balance that we're looking for. Thank you. And our next question comes from the line of Chris O'Connell, from Stiefel. Your question, please. Yeah, thanks. Good morning.
Speaker Change #108: Kind of the ones that that have stores that that are more direct competitors, who.
Speaker Change #108: Who is pricing is probably a little bit lower than win win.
Russell J. Weiner: Russell, you mentioned the company seeing more individual orders on the Uber Eats channel. And I was just wondering, does this create an opportunity to be more aggressive in promoting non-pizza items on the channel and maybe even attempt to drive sales during the lunch hour part? And also, as a company, do you share a voice on the platform right now among the pizza competitors? Is that similar to what we might see outside of the channel?
People buy things on the Aggregators.
Speaker Change #108: You are right, though on Aggregators, so that people may sign up for programs, where we're delivering maybe reduce cost or free but at the end of the day, particularly our customers looking at exactly what you said, they probably don't call. It total landed cost. They just call. It is it a bargain is at a value and.
Speaker Change #108: As long as we're doing that we're aligning competitively with the local competition through our pricing there and we've got best pricing Dominos Dot com.
Russell J. Weiner: You know, Chris, on that second one about sharing a voice inside versus outside the channel, I'll have to get back to you on that one. That's not something that I know off the top of my head.
Speaker Change #108: That's the balance that we're looking for.
Speaker Change #108: Yeah.
Speaker Change #109: Thank you.
Speaker Change #109: And our next question comes from the line of Chris O'connell.
Chris O'connell: From Stifel. Your question please.
Chris O'connell: Yeah. Thanks, good morning.
Russell J. Weiner: As far as what it is that we sell on Domino's, you know, we have been, I've been here a long time, and I've seen us promote just pizza on the media, and I've seen us promote just our individual items like, you know, sandwiches or pasta. And really, the magic for us... The big sales become when, I've used this before, this idea of pizza plus. [inaudible] And that's really what mix and match is all about. And so, you know, what we don't want to do is we don't want to slow down momentum in what's really working through experiments in other areas.
Chris O'connell: Russell you mentioned the company has seen more individual orders on new breach channel I was just wondering does this create an opportunity to be more aggressive in promoting non pizza items on the channel and maybe even attempt to drive sales during the lunch day part.
Chris O'connell: Also as a company share of voice on the platform right now among the pizza competitors is that similar to what we might see outside of the channel.
Russell: Chris on the second one on share of voice inside versus outside of the channel I'll have to get back to you on that one.
Chris O'connell: That's not something that I know off the top my head.
As far as what it is that that we sell on Domino's.
Speaker Change #110: We have been having.
Speaker Change #110: Here, a long time and I've seen as promote just pizza.
Andrew Strelzik: We have looked at lunch before. We got a nice lunch business, but that business is not for individual use. And so I think what this allows us to tap into individual users who, frankly, are willing to spend a lot more money on a per-person basis than they would through us. And then once they're part of Domino's, obviously, they've got the ability to then go back and buy those items and get loyalty points for it and all that.
Media and I've seen us promote just our individual items like sandwiches or pasta.
Speaker Change #110: And really the magic for us the big sales becomes when.
Speaker Change #110: Uses for for this idea of Pizza plus when you offer both and Thats really what makes it matches all about and.
Speaker Change #110: So.
Speaker Change #110: What we don't want to do is we don't want a slowdown momentum and what's really working.
Speaker Change #110: Through experiments in other area, we have looked at lunch before we got a nice lunch business, but that business is not individual users and so I think what this allows us to do is tap into individual users who think they are willing to spend a lot more money on a per person basis than they would through us and then once they are part of dominoes, obviously they have.
Andrew Strelzik: So that's probably the better way to think about it is that we're at our best when we promote our entire menu. Thank you. And our next question comes from the line of Andrew Strelzik from BMO Capital Markets. Your question, please. Hey, good morning.
Speaker Change #110: Got the ability to then go back and buy those items and get loyalty points for it and all that so.
Speaker Change #110: Probably the better way to think about it is we're at our best when we promote our entire menu.
Speaker Change #110: Yes.
Speaker Change #110: Thank you and our next question comes from the line of Andrew <unk> from BMO capital markets. Your question. Please.
Russell J. Weiner: Thanks for taking the question. I wanted to ask about the US store growth pipeline. The first half of the year, I know, is supposed to be roughly flat year over year, and it seems like it's tracking there, but how are you seeing that pipeline build with the comp strength and margins obviously moving in the right direction? And just wanted to get a sense from you on when you expect and your confidence that you'll see that inflection higher in the back part of the year?
Andrew Michael Charles: Hey, good morning, Thanks for taking my question I wanted to ask about the U S store growth pipeline in the first half of the year I know, we're supposed to be roughly flat year over year and it seems like it's tracking there, but how are you seeing that pipeline builds with the comp strength in margins, obviously moving in the right direction.
Andrew Michael Charles: And just wanted to get a <unk>.
Russell J. Weiner: Moving to 2025 and beyond. Yeah, thanks. We, you know, we've got visibility of the pipeline through the remainder of this year through next year, and I feel really good about hitting the 175 plus number. Stores tend to be a lagging indicator of, you know, performance, and, as you can expect, with profits going up, with order counts going up, we're becoming a more and more attractive proposition every day to our franchise. Regardless of Q1, you should know before these results, the pipeline was clear on the 175+.
Andrew Michael Charles: Sense from you on what.
Andrew Michael Charles: And do you expect your confidence that youll see that inflection higher in the back part of the year and even as we move into 2025 and beyond thanks.
Speaker Change #111: Yes. Thanks.
Speaker Change #112: We've got visibility to the pipeline through the remainder of this year through next year and I feel really good about hitting the 175 plus number.
Speaker Change #113: Stores tend to be a lagging indicator of.
Speaker Change #113: Performance.
Speaker Change #113: <unk>.
Speaker Change #113: As you can expect with profits going up with the order counts going up.
Speaker Change #113: We're coming up more and more attractive proposition everyday to our franchisees but.
Speaker Change #113: Regardless of Q1, you should note, but before these results the pipeline was clear on the 175 plus.
Speaker Change #113: Yes.
David E. Tarantino: Thank you. And our next question comes from the line of David Tarantino from Baird. Your question, please? Hi, good morning, Russell. I had a question related to one of the comp drivers that maybe gets underplayed.
Speaker Change #114: Thank you <unk>.
Speaker Change #114: Our next question comes from the line of David Tarantino from Baird. Your question. Please.
David E. Tarantino: Hi, Good morning, Russell I had a question related to the.
David E. Tarantino: One of the comp drivers that maybe gets underplayed and thats. The advertising approach. It seems like you've made quite a big evolution in the advertising.
Russell J. Weiner: And that's the advertising approach. It seems like you made quite a big evolution in advertising, you know, versus what you did in the past. In the first quarter, and maybe maybe before the first quarter, you know, with a lot more focused on the food and the value as opposed to some other topics. So I was just wondering if you could give us a sense of how much of a comp driver you think that was, if it's, you know, if it's even easy to separate that out from the others.
David E. Tarantino: Versus what you've done in the past in the first quarter and maybe maybe before the first quarter.
David E. Tarantino: A lot more focused on the food and the value as opposed to.
Speaker Change #115: To some other topics. So I was just wondering if you could.
Speaker Change #115: Give us a sense of how much of a comp driver you think that was methods.
Speaker Change #115: Easy to separate that out from the others.
Russell J. Weiner: Yeah, David, I'm really glad you noticed. The team, I think, has done a fantastic job. We brought in a brand new food photographer and filmmaker, and the deliciousness of a Domino's ad. I mean, it's just, it's a different ad than the old one. You take that and combine that with the talk value, the renowned value I talked about earlier, and that stuff breaks through.
Speaker Change #115: Yes, David I'm really glad you noticed the team I think has done a fantastic job, we brought up a brand new food photographers film filmmaker on.
Speaker Change #115: And the Deliciousness of.
Speaker Change #116: Dominoes, Ed I mean, it's just it's a different AD then than it used to be.
Speaker Change #116: And you take that and combine that with the talk value the renown value I talked about earlier.
Russell J. Weiner: I have a lot of, you know, people I know saying, wow, it feels like Domino's is advertising a lot more this year than it ever did, and the answer is, not really. It's what's happening is what we're doing is breaking through more, and that's where you wanna be. I think when we talked about hungering for more, the M and the R, the most delicious food and the renowned value, were going to be the two things we're going to lean into. So I appreciate you...
Speaker Change #116: And that stuff breakthroughs I have a lot of.
Speaker Change #116: People I know, saying Wow it it feels like Domino's is advertising a lot more this year than it ever did before and the answer is not really what's happening is what we're doing is breaking through more.
Speaker Change #116: And that's that.
Speaker Change #116: That's where you want to be and I think when we talked about hungry for more.
The VM and the are the most delicious food and they are now and value we're going to be the two things we're going to lean into it. So I appreciate you noticing that.
Brian James Harbour: And our next question comes from the line of Brian Harbour from Morgan Stanley. Your question, please. Thanks. Good morning.
Speaker Change #116: Yes.
Speaker Change #116: Thank you and our next question comes from the line of Brian <unk> from Morgan Stanley. Your question. Please.
Yeah. Thanks, Good morning, maybe just on the.
Russell J. Weiner: Maybe just on the operational focus on dough, what was the nature of that? And what's still planned for this year? Are those things that sort of have a cost benefit in your view?
The operational focus on DAU, what was the nature of that and what's what's still plan for this year are those things that sort of have a cost benefit in your view or is it more just about kind of product consistency and service time.
Russell J. Weiner: Or is it more just about kind of product? Yeah, thanks. It's really about consistency. And what and consistency begets repeat business per person. And so, you know, the way I think of it. We don't want to look at it that way.
Speaker Change #117: Yeah. Thanks, it's really is about consistency.
Speaker Change #117: And consistency be gets repeat purchase.
Speaker Change #117: And so the way I think of it as well.
Speaker Change #117: In the U S. We sell about one 5 million pieces everyday.
Russell J. Weiner: We want to look at, we sell one pizza, one and a half million. Every pizza that we make is a chance to delight a customer or disappoint a customer. And so the training we had last year was a little bit more focused on Circle of Operations technology, and you're seeing the results now in delivery. The stuff we're doing this year, as you said, the first sprint was on the dough. So you get that right, plus you have the loyalty program on top of that, then you have two things driving repeat purchase, and that's what we want. Do you think this could be offensive for us?
Speaker Change #117: We don't want to look at it that way, we want to look at we sell one pizza, one 5 million times and.
Speaker Change #117: Every pizza that we make as a chance to delight, our customer or disappoint a customer.
Speaker Change #117: So the training we had last year was a little bit more focus on circle of operations technology and Youre seeing the results now in delivery times. The stuff. We're doing this year as you said versus the first sprint was on the Doe than we've got ingredients and baking that is all about the consistency and consistency really drives repeat purchase.
Speaker Change #117: So you get that right plus you have the loyalty program on top of that then you have two things driving repeat purchase and Thats, where we want to be we think this can be.
Peter Mokhlis Saleh: Thank you. Our next question comes from the line of Peter Saleh from BTIG. Your question, please? Great, thanks. I just wanted to ask about the US pizza category in general. Russell, do you think it's taking share at this point in time? I think coming out of COVID, out of really 21, there was some pizza fatigue going on, that seems to have subsided.
Speaker Change #117: Sensitive for US an offensive move on consistency.
Speaker Change #117: Yes.
Speaker Change #117: Thank you. Our next question comes from the line of Peter Saleh from <unk>. Your question. Please.
Peter Mokhlis Saleh: Great. Thanks.
Peter Mokhlis Saleh: I just wanted to ask about the U S Pizza category in General Russell do you think it's taking share at this time at this point in time, I think coming out of Covid out of really 'twenty. One there was some pizza fatigue going on but that seems to have subsided. Just curious if you think the category in of itself is growing faster than.
Russell J. Weiner: Just curious if you think the category in and of itself is growing faster than it has been in the past couple of years? Or are you guys just taking a share with some of the self-help initiatives that you have in place? Thanks. Yeah, I think, you know, we've returned to where we were what our calling call was, calling card was over time, which is that, you know, this is a category that's Tremendous, and then it's growing kind of in line with population. What we always did is we were what I call an equal opportunity share. And, you know, frankly, we lost that. You know, last year, two years, and we're back.
Peter Mokhlis Saleh: It had been in the past couple of years or are you guys just taking share with some of the self help initiatives that you have in place. Thanks.
Russell: Yes, I think.
We've returned to where we were what are calling call wed calling card was over time, which is that this is a category that is tremendous and it's growing kind of in line with population. What we have always done is we've been what I call it equal opportunity share stealing.
Russell: And.
Russell: Frankly, we lost that.
Russell: Last year, two years and we're back.
Russell J. Weiner: And so we're seeing those same dynamics, and these self-help initiatives are helping drive share in delivery and carry out. I mean, the carry out numbers are just tremendous, and, you know, one of the things we always talk about is The Incrementality of Carriers. So, when we split a store... If carryout is growing, growing big time, that is yet another reason, in addition to store profitability, why franchisees are going to want to open more stores.
Russell: And so we're seeing those same dynamics and these help self help initiatives.
Russell: Are helping drive share in delivery and Carryout.
Russell: Carry out numbers are just tremendous and.
Russell: One of the things we always talk about is is the incremental <unk> of Carryout and so when we split our store 80% of the carrier volume is incremental and so a carryout is growing growing big time.
Russell: That is yet another reason in addition to store profitability why franchisees are going to want to open up stores and so I think all of this stuff is.
Jon Michael Tower: And so I think all this stuff is a cycle that's positive. Thank you. And our next question comes from the line of Jon Tower from Citi. Your question, please. Great, thanks for taking the question. I'm curious. I wanted to come back to your comments earlier, Russell, regarding the loyalty program. I think you mentioned in the US that you're seeing some pretty good uptick from new lapsed users and light users, but I'm curious to hear about how existing loyalty members have responded to the program so far and all the changes that have taken place.
Russell: Ah is a cycle that's positive for us.
Speaker Change #118: Thank you.
Speaker Change #118: And our next question comes from line of John Taylor from Citi. Your question. Please.
Great. Thanks for taking the question.
John Taylor: Curious I wanted to come back to your comments earlier Russell regarding the loyalty program. I think you had mentioned in the U S that you are seeing some pretty good.
John Taylor: Uptake from new lapsed users light users, but I'm curious to hear about how existing loyalty members have responded to the program so far and all the changes that have taken place and then separately in terms of.
Russell J. Weiner: And then separately, in terms of consumer demand, obviously, you've had a lot of promotional, heavy promotional windows during the fourth quarter and into the first quarter here. But how has the consumer responded to the brand outside of those windows? Um, well, first, on the loyalty program. I think it's safe to say that not only new customers but existing customers are really engaging in the program. If you're an existing customer and you had 50 points in your loyalty bank, you woke up when we launched this new program, and you were able to get two free items instead of zero.
John Taylor: The consumer demand, obviously, you've had a lot of promotional heavy promotional windows during the fourth quarter and into the first quarter here. How is the consumer responded to the brand outside of those windows.
Speaker Change #120: Got it.
Well first on the loyalty program I think it's safe to say that not only new customers, but existing customers are really engaging in the program. If you are an existing customer and you had 50 points in your <unk>.
Loyalty bank.
You woke up when we launched this new program in Europe, we get two free items instead of zero and so there are a lot of happy customers, who are existing customers there.
Russell J. Weiner: And so there are a lot of happy customers who were existing customers there. When you talk about consumer demand, I mean, I love, I get this question a lot. Hey, guys, it seems like you're increasing your promotional key. We're really not. They're just more impactful. And I think that's why folks are talking about them more.
Speaker Change #120: When you talk about consumer demand.
Speaker Change #120: I Love I get this question a lot of hey, guys. It seems like you're increasing your promotional cadence we're really not they are just more impactful.
Speaker Change #120: And I think Thats why folks are talking about them more but we've had a 52 week count promotional calendar.
Russell J. Weiner: But we've had a 52-week promotional calendar. Deer Front Sound, if they're working. They're working better because rather than just focus on price, focus on things that, You know, break cultural tensions, carry out tips everywhere you go. I'm sorry, you tip, we tip everywhere you go, on YouTube or Facebook, to get people to talk more about Domino's because we're breaking that tension and that's why it feels like we're doing more, but 52 weeks of promotion is what we've done for a long time.
Speaker Change #120: For years and years and years.
Speaker Change #120: <unk>.
Speaker Change #120: The Big difference now is just they are working better.
They are working better because rather than just focus on price points, we're focused on on things that.
Speaker Change #120: Break cultural tensions.
Speaker Change #120: The Carryout tips everywhere you go I'm, sorry, Youtube, we'd hope everywhere you go today.
Speaker Change #120: Whether they're giving you extra service or not folks are asking for tips. So you get that screen up there in fact, I think maybe after this call I'm expecting John you're asking you to tip your.
Speaker Change #120: But what we're doing though is we're using that talk value to get people to talk more about domino's, because we're breaking their attention and.
Speaker Change #120: And Thats why it feels like we're at we're doing more but 52 weeks of promotions what we've done.
Russell J. Weiner: I'm going to add something to that... Transcribed by https://otter.ai. Yeah, that's a great point, Sandeep, which I don't like to admit when Sandeep makes great points. You know, the other pieces of the renowned value that are different than what we did before. To get this value.
Speaker Change #120: For a long time.
I'll just add something to that.
Speaker Change #121: John because I think bill when you look at the promotional windows as we talked about and what's the cadence outside the promotional windows.
Speaker Change #122: Very good but why is it very good it's because of the loyalty program.
Speaker Change #123: The activity that's actually generated through the loyalty program is really dispersing transactions and redemptions right through the quarter and I think that speaks of the strength of what we're doing with Renault and value in the loyalty program specific yeah. That's a that's a great point, sandeep, which I don't like to admit when sandy it makes a great point. So I just wanted to go.
Speaker Change #123: Are there other pieces in the renowned value that are different than what we did before is to get this value you have to sign up for the loyalty program you can get mix and match you don't have to be a loyalty member, but to get the carryout tips to get emergency pizza to get.
Sandeep Reddy: The Senate for the Loyalty......but to get the carry out tips to get emergency pizza, go to: https://www.youtube.com.uk. So what these things are doing is they're working together versus working separately.
Speaker Change #123: <unk> four year of delivery.
Speaker Change #123: You have to be part of the loyalty program and so what these things are doing is they are working together.
Speaker Change #123: Working separately and I think you just see the compounding effects of that.
Jeffrey Andrew Bernstein: The End. Thank you. And our next question comes from the line of Jeffrey Bernstein from Barclays. Your question, please. Great. Thank you very much.
Yes.
Speaker Change #124: Thank you.
Speaker Change #124: And our next question comes from the line of Jeffrey Bernstein from Barclays. Your question. Please.
Jeffrey Andrew Bernstein: Great. Thank you very much.
Sandeep Reddy: Just a question on the near-term comps for Domino's and the industry. On Domino's, I know you mentioned the second quarter comp below the 5-6 in the first quarter. I'm wondering whether that surprises you relative to plans at the start of the year. I would think that the growth in Uber and Loyalty and Easier Compares would more than offset the fate of Emergency Pizza. So I was just wondering whether that similarly surprises you.
Jeffrey Andrew Bernstein: A question on the.
Jeffrey Andrew Bernstein: Near term comps for Domino's and the industry I guess I'm Domino's I know you mentioned the second quarter comp below the $5 six in the first quarter I'm wondering whether that surprises you relative to plans to start of the year I would think that the ramp in Uber and loyalty and easier compares with more than offset the feet of emergency pizza. So just wondering.
Jeffrey Andrew Bernstein: Whether that similarly surprises you and and Russell on the industry, you mentioned, a slowing <unk> category in terms of seemingly the macro.
Sandeep Reddy: And Russell, on the industry, you mentioned a slowing QSR category in terms of, seemingly, the macro. Just wondering, with you having a decade plus of experience there, does that surprise you? I would think QSR would be viewed as more defensive against a slowing macro, and yet perhaps we're seeing something otherwise.
Jeffrey Andrew Bernstein: I'm just wondering would you have a decade plus of experience. There does that surprise you I would think <unk> would be viewed as more defensive into a slowing macro and yet perhaps we're seeing something otherwise. So just a question on domino's and the broader macro thank you.
Russell J. Weiner: Question on Domino's and the broader macro. Thank you. I'll ask Sandeep to talk about the near-term comps, and then I'll answer your question on... So, uh, so I think about the near-term comps... 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 We knew that we'd had great success with Muncie Pizza, and we were glad we did.
Jeffrey Andrew Bernstein: I'll ask Sandeep to talk about the near term comps and then I'll I'll answer your question on transactions.
Sandeep Reddy: So I think on the near term comps in Q2 that we talked about on our calls really it's not so surprising at all I mean, this is pretty much inline with our plans.
Sandeep Reddy: Do that we've had great success with a bunch of pizza and we were glad we did it because I'm not sure you acquired customers into the loyalty program.
Sandeep Reddy: But we did see some some lift which I think will kind of normalize as we go into Q2.
Sandeep Reddy: The point, we made making since the beginning of the are we expecting ramping and hooper to happen over the course of the year. So we.
Russell J. Weiner: But we did see some lift, which I think we'll normalize as we go into Q2. Please see review 107757 on PissedConsumer.com and I think on the QSR. What I was talking about was really more order count.
Sandeep Reddy: We expect to be slightly below our Q1 performance, which was very very good and we still think Q2 is going to be very very good but in line with what we expected and I think on the <unk>.
Sandeep Reddy: Space Jeff.
Sandeep Reddy: I was talking about was really more order count.
I think the assistant pricing that's been taken in the category and consumers are responding now youre seeing it.
Sandeep Reddy: I think, you know, there's Pricing that's Category. You know, in the results and what I'm excited about for us is the pricing we've taken. Unknown Executive, Nerses Setyan, Danilo Gargiulo, Cynthia Headen, Domino's Pizza Inc., to both our customers and our franchisees. And look, I'm sure there'll be others who are also doing the same, but I think they will be a little bit of an outlier. Yeah, and I just want to add one...
Sandeep Reddy: And the results and what.
Sandeep Reddy: I am excited about for US is the pricing we've taken.
Sandeep Reddy: Is really in the rearview mirror and so we can focus on driving value profitable value.
Sandeep Reddy: To both our customers and our franchisees and look I'm sure there'll be others in the industry, who are also doing the same but I think we'll be a little bit of an outlier there.
Speaker Change #125: Yes, and I just want to add one thing on this because we've talked.
Sandeep Reddy: This thing about SmartPrices.. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. Smart Pricing in 23 was almost taking no price. And that's really what actually drove that value difference.
<unk> talked about in the prepared remarks on Russell devoted on spot pricing.
Speaker Change #125: Interestingly, what smart pricing as we took a lot of spot pricing in 'twenty two and.
Speaker Change #125: Market was highly inflationary.
Speaker Change #125: Smart pricing in 2003 was almost taking no pricing.
Speaker Change #125: And that's really what actually drove that X that value differential that is now really shoring up.
Sandeep Reddy: The number of questions we got right through 23 on do you have pricing power, why are you not taking pricing, because everybody else is taking pricing. We were really focused on two things, and that happened. And so we just kept on the straight and narrow, and we were really teeing up for what General. Yeah, I think, you know, one of the things we talked about before was consistency of product. If there are two things, and we've got this tremendous e-commerce business, so we know, we can tell on conversion when we do things right or wrong. Product consistency is really important. The other thing is price.
Speaker Change #125: The number of questions. We got for right through 'twenty three on do you have pricing power why youre not taking pricing because everybody else is taking pricing, but we were really focused on two things one is making sure customer value was maintained to making sure that the flow through from a franchisee perspective has been restored and that happened.
Speaker Change #125: For the 22 pricing that we took and so we just kept on the suite of narrow and we are really paying up for whats ended up happening in Q4 and Q1, Yes, I think one of the things we talked about before with consistency of product. If there are two things that we've got this tremendous ecommerce business. So we know we can tell on conversion, where we do things right and we do things wrong.
Speaker Change #125: Product consistency is really important the other thing is pricing consistency people don't want whiplash.
Russell J. Weiner: Transcribed by https://otter.ai We took that in 2022, and now they're getting what they expect, and it's profitable for our franchisees, and we're seeing that in the numbers. Thank you. And our next question comes from the line of Meredith Jensen from HSBC. Your question, please. Yes, hi, I was on prior calls; I heard you all speak about the experience Domino's has had internationally with third-party delivery.
Speaker Change #125: <unk>.
Speaker Change #125: Get what they expect in and.
Speaker Change #125: We took that in 2022 and now they're getting what they expect and it's profitable for our franchisees and we're seeing that in the numbers.
Speaker Change #125: Yes.
Speaker Change #126: Thank you.
Speaker Change #126: Our next question comes from the line of Meredith Jensen from HSBC. Your question. Please.
Meredith Jensen: Yes, Hi, Hi, Chris and on prior calls I've heard you all speak about the experience gentleman asked this hard internationally with third party delivery and now that it's been rolled out here I was just kind of wondering if you might speak a little bit about sort of the maybe the consumer behavior differences that youre seeing.
Meredith Jensen: And now that it's been rolled out here, I was just kind of wondering if you might speak a little bit about sort of the maybe the consumer behavior differences that you're seeing or some other things that, you know, that have come up, even anecdotally about the differences there. Thanks. Yeah, sure. All right.
Meredith Jensen: Some other things.
Meredith Jensen: They have come up.
Meredith Jensen: Even anecdotally about.
Meredith Jensen: The difference is there.
<unk>.
Speaker Change #127: Yes sure.
Russell J. Weiner: I mean, really, what we've seen so far is some of it's very in line with what we thought going in, which was these customers, as we said earlier, www.youtube.com.uk [inaudible] I'm sorry, about two-thirds incremental. Yeah, sorry, about two-thirds incremental. And so the thing on the other side is just more the..., https://www.youtube.com.uk Pricing and Profit End, Kind of what we thought, but how we're getting to it is just in a little bit of a different way. Thank you. And our next question comes from the line of Alex Lagel from Jefferies. Okay, thanks.
Speaker Change #127: Really what we've seen so far is some of it very in line with what we saw what we thought going in which was.
Speaker Change #127: <unk> customers as we said earlier would be more single users.
Speaker Change #127: They'd be younger.
Speaker Change #127: They especially on over would be incremental to us and Sandeep has talked about a few months into this it looks like they are about <unk>.
Speaker Change #127: 5% incremental.
Speaker Change #127: Hum.
Speaker Change #127: Two thirds im sorry about two thirds into incremental yes, sorry about two thirds incremental and so.
Speaker Change #127: The thing on the other side is just more of the.
Speaker Change #127: The promotional nature of it and.
Speaker Change #127: The pricing and profit ended up being kind of what we thought but how we're getting to it it's just in a little bit of a different way.
Anything to add.
Speaker Change #127: Great.
Speaker Change #128: Thank you.
Speaker Change #128: Our next question comes from the line of Alex Slagle from Jefferies. Your question. Please.
Alexander Russell Slagle: Okay. Thanks, great to see everything coming together here and the question on the.
Alexander Russell Slagle: Great to see everything coming together here. I did a question on the operations and the acceleration and delivery volumes, seemingly just starting and so forth. You're able to drive the speed improvements. But as the volumes ramp further, I guess there will be more of these individual orders on 3P and perhaps more surges of demand at certain times. I mean, how much of your ability to keep up with the volumes and improve speed will require a step up in hiring drivers versus productivity and technology-driven improvements or other opportunities that you see out there?
Alexander Russell Slagle: <unk> and the acceleration delivery volumes seemingly just starting and so far you're able to drive the speed improvements, but as the volumes ramp further.
More of these individual orders on <unk>, perhaps more surges in demand at certain times I mean, how much of your ability to keep up with the volume to improve speed will require a step up in hiring drivers versus productivity and technology improvements or other opportunities that you see out there.
Russell J. Weiner: Yeah, well, the nice thing about our business is it scales really, really well. And so, there's, I know you know this, but it sounds like we have to add a driver every time we add an order. And so what we're trying to do, what we have done with a lot of these back-of-house improvements, is make these orders just more scalable, more leveraged.
Speaker Change #130: Yes, well the nice thing about our business is at scale is really really well and so.
Speaker Change #130: I know you know this but it sounds like we have to add a driver of every time, we add an order and so what we're trying to do and when we have done with a lot of these back of house improvements.
Speaker Change #130: As we've made these orders.
Speaker Change #130: More scalable more leverages all.
Russell J. Weiner: Um, and so that's, that's part of the process, but secondarily, as we talked about, driving for Domino's Pizza now is an attractive job. You know, we're about to see a whole bunch of franchisees, and more importantly, future franchises, at our rally in order to become a Domino's franchisee. And so, with the success of the brand, what we're seeing is, you know, Thank you. And our final question for today comes from Jim Salera from Stevens.
Speaker Change #130: And so that's that's that's that's part of the process and but secondarily as we talked about.
Speaker Change #130: Drive for Domino's Pizza now is an attractive job.
Speaker Change #130: We're about to see a whole bunch of.
Speaker Change #130: Franchisees and more importantly, future franchisees at a rally in order to.
Speaker Change #130: Domino's franchisee you need to start as a driver or a pizza maker.
Speaker Change #130: And so with the success of the brand and what we're seeing is.
Speaker Change #130: People attracted to both to drive our job and the opportunity at Domino's.
Speaker Change #130: Thank you and our final question for today comes from the line of Jim <unk> from Stephens. Your question. Please.
Russell J. Weiner: Your question, please. Hi guys, thanks for squeezing us in. I wanted to ask on the New York style pizza innovation, just as you know, how that triangulates with some of the other promotions you guys have going on, in just any color you might have on, driving either new use or new consumption from people that are discovering Domino's on the third party apps, or potentially, you know, newcomers to the loyalty program, and how you can tie innovation into those new newer user Yeah, that's a great question.
Jim: Hey, guys. Thanks for squeezing us in.
Jim: To answer on the New York style Pizza innovation, just as how that Triangulates with some of the other promotions you guys have going on and just any color you might have.
Jim: On driving either new user new consumption from people that are.
Jim: Discovering domino's on the third party apps.
Jim: Potentially new comers to the loyalty program and how you can tie innovation into those new newer users.
Speaker Change #131: Yes, Jim that's a great question.
Russell J. Weiner: You know, New York is our first new product launch of the year. And one of the things that you know, testing shows for us is this is a different, This is a customer who prefers a thinner, foldable pizza to the customer who really, you know, ingredient quality is important to them. And so we think bringing this into a portfolio is actually going to be attractive to folks who maybe are pizza lovers, but are traditional hand toss maybe a little bit too, you know, https://www.larryweaver.com It's important to know when we launch products, most of the time, it's because we think they are permanent fixtures to our, The other nice thing about New York style, which I like, and of course we're promoting it through loyalty, is our New York style is available in all three sizes in medium large and a lot of cases extra large but but but but being part of a medium means that could be part of our $6.99 mix and match and that that was that was, Thank you, Jim.
Speaker Change #131: New York is our first new product launch for the year and one of the things that testing shows for US is this is a different customer as the customer who prefers a thinner foldable pizza is a customer who really.
Jim: Ingredient quality is as important to them and so we think bringing this into our portfolio is actually going to be attractive to folks who maybe.
Jim: Our pizza lovers, but.
Jim: Our traditional hand, tossed maybe a little bit too.
Two two <unk> for them and cross type and so it is not this is and I should have said this in the in the remarks. This is not a L. T O for us and so it's important to know when we launch products. Most of the time, it's because we think they are permanent fixtures to our menu.
The other nice thing about New York style, which I like and of course, we're promoting it through loyalty with points. Like you said is our New York style is available in all three sizes and medium large and a lot of cases extra large but by being part of a media means that could be part of our $6 99 mix and match and that that was that was superb.
Important.
Speaker Change #132: Thank you Jim and that was our last question of the call I want to thank you all for joining our call today and we look forward to speaking to you. All again soon you may now disconnect.
Operator: That was our last question for the call. I want to thank you all for joining our call today, and we look forward to speaking to you all again. Disconnect. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Speaker Change #133: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.