Q2 2024 Domino's Pizza Inc Earnings Call
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Operator: Thank you for standing by, and welcome to Domino's Pizza's 2nd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this 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.
Thank you for standing by and welcome to Domino's Pizza's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Greg Lemenchick, Vice President of Investor Relations.
Operator: As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Greg Leminchik, Vice President of Investor Relations. Please go ahead, sir.
Greg Lemenchick: Good morning, everyone. Thank you for joining us today for our second quarter 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 FDA.
Speaker Change: Please go ahead, sir.
Greg Lemenchick: Good morning everyone. Thank you for joining us today for our second quarter conference call. Today's call will begin with our Chief Executive Officer, Russell Weiner, 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.
Speaker Change: In addition, please refer to the 8K earnings release to find disclosures and reconciliations of our non-GAAP financial measures that may be referenced on today's call.
Speaker Change: 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. And with that, I'd like to turn the call over to Russell.
Greg Lemenchick: In addition, please refer to the 8K earnings release to find disclosures and reconciliations of our 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 Russ.
Russell J. Weiner: Thank you, Gray. And good morning, everybody. Our second quarter performance demonstrated once again that our hungry for more strategy is delivering positive results. For the second straight quarter, we drove U.S. comp performance in the healthiest way possible, profitable or accountable.
Russell J. Weiner: Thank you, Gray. And good morning, everybody. Our second quarter performance demonstrated once again that are hungry for more strategy is delivering positive results.
Russell J. Weiner: For the second straight quarter, we drove U.S. comp performance in the healthiest way possible.
Russell J. Weiner: Positive order counts in our delivery business, positive order counts in our carryout business, positive order counts across all income lines. We also continue to see improvement in our international comps and generate earnings that are in line with our expectations. As a result of our strong results so far and expectations for the back half of the year, we remain on track to achieve our guidance for annual global retail sales growth of 7% or more and operating profit growth of 8%. I want to provide an update on our net store growth guidance, which we have temporarily suspended. First, I want to reiterate that our U.S. pipeline is strong and it continues to grow.
Russell J. Weiner: through profitable or account growth.
Speaker Change: Positive order counts in our delivery business, positive order counts in our carry-out business, positive order counts across all income cohorts.
Speaker Change: We also continue to see improvement in our international comps and generate earnings that were in line with our expectations.
Speaker Change: As a result of our strong results years to date and expectations for the back half of the year, we remain on track to achieve our guidance for annual global retail sales growth of 7% or more and operating profit growth of 8% or more.
Speaker Change: I want to provide an update on our Net Store Growth Guidance, which we temporarily suspended this morning.
Speaker Change: First, I want to reiterate that our U.S. pipeline is strong and it continues to grow.
Russell J. Weiner: We continue to expect 175 or more net new stores annually in 2024 through 2028. However, we now expect to fall below our net store growth target for international in 2024 by approximately 175 to 275 stores, primarily as a result of challenges in both openings and closures, based on Domino's Pizza Enterprises, one of our master franchises.
Speaker Change: We continue to expect 175 or more net new stores annually in 2024 through 2028 in the U.S.
Speaker Change: We now expect to fall below our net store growth target for international in 2024 by approximately 175 to 275 stores, primarily as a result of challenges in both openings and closures
Speaker Change: faced by Domino's Pizza Enterprises, DPE, one of our master franchisees.
Russell J. Weiner: We're partnering closely with DPE as they work through this process. Now, it's important to note that our largest expected growth markets of China and India remain on track to deliver on their growth potential. China, P.D.A.S.H.
Speaker Change: We're partnering closely with DPE as they work through this process.
Speaker Change: Now it's important to note that our largest expected growth markets of China and India remain on track to deliver on their growth potential.
Russell J. Weiner: announced they'll open store number 1,000 by the end of this year, and then they'll increase their net openings per year to between 300 and 350, starting in 2025. Back in May, Jubilant, our master franchisee based out of India, increased its total store count potential to 5,500 over the medium term in the six global markets in which it operates. When you think that it took Domino's over 60 years to open 5,500 stores in the United States,
Speaker Change: In China, DPC Dash announced they'll open store number 1000 by the end of this year.
Speaker Change: And then they'll increase their net openings per year to between 300 and 350, starting in 2025.
Speaker Change: Back in May, Jubilant, our master franchisee based out of India, increased its total store count potential to $5,500 over the medium term in the six global markets in which it operates.
Speaker Change: When you think that it took Domino's over 60 years to open 5,500 stores in the United States,
Russell J. Weiner: Jubilant's goal exemplifies the Hungry for More mentality of our global... Now, let's look at our second quarter results through the lens of our M-O-R-E, Hungry for More Pillars, which continue to drive our... As you know, M stands for the most delicious food. We know we've got the most delicious food in the industry and are focused on showcasing that with more mouth-water We launched our New York-style pizza in Q2, and it's what we call innovation with intent.
Speaker Change: Jubilant's goal exemplifies the hungry for more mentality our global system is taking on.
Speaker Change: Now let's look at our second quarter results through the lens of our MORE, Hungry for More Pillars, which continue to drive our business.
Speaker Change: As you know, M stands for the most delicious food. We know we've got 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 our sales channels.
Russell J. Weiner: When we launch a new product, it's got a specific role, and it's intended to stay on the menu permanently. New York style pizza is another example of that. It's got a crust that's thinner and more foldable than our traditional crust, and was designed to appeal to pizza lovers whose idea of deliciousness is a little bit different from Domino's pizza offerings in the past. The result has been a high mix of sales within our pizza office. In addition to being a product that showcases deliciousness in a different way, New York style pizza is available as part of our mix and match offer.
Speaker Change: We launched our New York style pizza in Q2, and it's what we call innovation with intent.
Speaker Change: When we launch a new product, it's got a specific role, and it's intended to stay on the menu permanently.
Speaker Change: New York style pizza is another example of that.
Speaker Change: It's got a crust that's thinner and more foldable than our traditional crust. It was designed to appeal to pizza lovers whose idea of deliciousness is a little bit different than Domino's Pizza offerings in the past.
Speaker Change: The result has been a high mix of sales within our pizza offerings.
Speaker Change: In addition to being a product that showcases deliciousness in a different way, New York-style pizza is available as part of our mix-and-match offer.
Russell J. Weiner: Domino's Rewards members can also redeem 60 points for a free medium two topping New York style pizza. This new offering drives more than just deliciousness. It drives value, and it drives more customers into our loyalty platform. And that's why we call it innovation within The O.N.
Speaker Change: Domino's Rewards members can also redeem 60 points for a free medium two-topping New York style pizza.
Speaker Change: This new offering drives more than just deliciousness, it drives value and it drives more customers into our loyalty platform and that's why we call it Innovation with Intent.
Russell J. Weiner: Hungry for More stands for Operational Excellence. This is how we'll deliver on our promise to have the most innovative solution 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. This is a series of three product training sprints focused on our dough, how we build and make our products, and then how we cook.
Speaker Change: The O.N. Hungry for More stands for Operational Excellence.
Speaker Change: This is how we'll deliver on our promise to have the most delicious food, by consistently driving a great experience with our product.
Speaker Change: As I shared on our last earnings call, in 2024, we're rolling out a new service program we're calling More Delicious Operations.
Speaker Change: This is a series of three product training sprints focused on our dough, how we build and make our products, and then how we cook them.
Russell J. Weiner: In Q1, we embarked on our first sprint, which focused on our dough, and are now rolling out our second sprint around ingredients and products. These product sprints and last year's summer of service are working together with our DomOS technology to drive improvements in our delivery times. In fact, estimated average delivery times were nearly 10% better.
Speaker Change: In Q1, we embarked on our first sprint, which focused on our dough, and are now rolling out our second sprint around ingredients and product builds.
Speaker Change: These product sprints and last year's Summer of Service are working together with our DomOS technology to drive improvements in our delivery time.
Speaker Change: In fact, estimated average delivery times were nearly 10% better.
Russell J. Weiner: In Q2 of 2024 than they were in Q2 of 2022. And we're doing all of this while our stores are handling more work. So I wanted to congratulate our franchisees and operators, whose commitment to service allows us to deliver on the promise we're striving to make in our marketing, that Domino's has the most delicious food. Our third Hungry for More pillar is R for Renowned Value.
Speaker Change: in Q2 of 2024 than they were in Q2 of 2022.
Speaker Change: And we're doing all of this while our stores are handling more orders.
Speaker Change: So I wanted to congratulate our franchisees and operators whose commitment to service allows us to deliver on the promise we're striving to make in our marketing, that Domino's has the most delicious food.
Russell J. Weiner: And as I said before, it's not just about having the lowest price in the market; it's about providing value that's innovative and memorable. Renowned value breaks through the sea of same-ness discounts you see in the marketplace. Now, Domino's Rewards is an example of that renowned value. It continues to perform well and was the key driver of our strong U.S. comp performance. You'll recall our objectives for the program were to drive new users, particularly carryout customers, and increase the frequency of light. I'm happy to report that Domino's Rewards continues to deliver on those objectives. Our active members are up significantly year-to-date through Q2, showing that the program is continuing to build.
Speaker Change: Our third Hungry for More pillar is R for Renowned Value.
Speaker Change: And as I said before, it's not just about having the lowest price in the market, it's about providing value that's innovative and memorable.
Speaker Change: For now, value breaks through the sea of sameness discounts you see in the marketplace.
Speaker Change: Now, Domino's Rewards is an example of that renowned value.
Speaker Change: It continues to perform well and was the key driver of our strong U.S. comp performance in Q2.
Speaker Change: Do you recall our objectives for the program were to drive new users, particularly carryout customers, and increase the frequency of light users?
Speaker Change: I'm happy to report that Domino's Rewards continues to deliver on those objectives.
Speaker Change: Our active members are up significantly year-to-date through Q2, showing that the program is continuing to build.
Russell J. Weiner: Redemptions across both the delivery and carryout channels have also increased, which is contributing to the transaction growth you're seeing in each of our businesses. For example, in our carryout business, orders with loyalty redemption in the first half of 2024 are twice as high, 2x, as they were in the first half of 2023 under our old loyalty program. So, as Americans continue to look for value, Domino's is providing renowned value and doing it profitably for our franchise. National promotions are another way we're driving renown back. In Q2, we had two boost weeks, both of which were very successful in driving transactions and customer acquisition.
Speaker Change: Redemptions across both the delivery and carry-out channels are also increasing, which is contributing to the transaction growth you're seeing in each of our businesses.
Speaker Change: For example, in our carryout business, orders with a loyalty redemption in the first half of 2024 are twice as high, 2x, as they were in the first half of 2023 under our old loyalty program.
Speaker Change: So as Americans continue to look for value, Domino's is providing renown value and doing it profitably for our franchises.
Speaker Change: National promotions are another way we're driving renown value. In Q2, we had two boost weeks, both of which were very successful in driving transactions and customer acquisition.
Russell J. Weiner: As it relates to our promotional cadence in 2024, you can continue to expect around 6th Goose. While providing renowned value through our own channels is one part of our Barbell strategy, tapping into the aggregator marketplace is the other, and our launch into this space remains on track to exit the year at 3% or more of sales coming through. Everything we do at Domino's is enhanced by our best-in-class franchisees. They're the E in our Hungry for More strategy. In early May, we hosted our largest worldwide rally with almost 9,000 franchisees and team members in attendance.
Speaker Change: As it relates to our promotional cadence in 2024.
Speaker Change: You can continue to expect around six goose weeks.
Speaker Change: While providing renowned value through our own channels is one part of our Barbell strategy, tapping into the aggregator marketplace is the other. And our launch into this space remains on track to exit the year at 3% or more of sales coming through Uber Eats.
Speaker Change: Everything we do at Domino's is enhanced by our best-in-class franchisees. They're the E in our Hungry for More strategy.
Speaker Change: In early May, we hosted our largest worldwide rally with almost 9,000 franchisees and team members in attendance.
Russell J. Weiner: This year's event was appropriately themed, Hungry for More. We brought this strategy to life across our global system, and the results show. This was our most highly rated rally of all time.
Speaker Change: This year's event was appropriately themed, Hungry for More.
Speaker Change: We brought this strategy to life across our global system, and the results showed.
Speaker Change: This was our most highly rated rally of all time.
Russell J. Weiner: To close, I couldn't be more energized by the future of Domino's Pizza and seeing the excitement of franchisees at our rally really brought that to life for me and the leadership. Our results show that our strategy is responding with customers and our system. All of this gives me great confidence that we can continue to drive significant long-term value creation for our shareholders, and with that, I'll turn things over. Thank you, Russell, and good morning, everyone.
Speaker Change: To close, I couldn't be more energized by the future of Domino's Pizza and seeing the excitement of franchisees at our rally really brought that to life for me and the leadership team.
Speaker Change: Our results show that our strategy is resonating with customers and our system.
Speaker Change: All of this gives me great confidence that we can continue to drive significant long-term value creation for our shareholders.
Speaker Change: And with that, I'll turn things over to Sandeep.
Sandeep Reddy: Our second quarter financial results were right in line with our expectations. Our strong start to the year has resulted in profit-dollar growth versus 2023 for our U.S. frank. We remain on track to achieve our target of $170,000 or more average U.S. franchise store profit for 2020. Excluding the impact of foreign currency, global retail sales grew 7.2% in the quarter due to positive U.S. and international comps and global net
Sandeep Reddy: Thank you Russell and good morning everyone. Our second quarter financial results were right in line with our expectations.
Speaker Change: Our strong start to the year has resulted in profit-dollar growth versus 2023 for our U.S. franchisees.
Sandeep Reddy: We remain on track to achieve our target of $170,000 or more average U.S. franchise store profit for 2024.
Sandeep Reddy: Excluding the impact of foreign currency, global retail sales grew 7.2% in the quarter due to positive U.S. and international comps and global net store growth.
Unknown Executive: and international cons and global net store growth. U.S. Retail sales increased 6.8%, and international retail sales grew 7.7% excluding the impact of foreign currency. During Q2, same-store sales for the U.S. came in at 4.8%, which was in line with our expectations. Our strong cons and the quarter for carryout of 7.9% and delivery of 2.7% were once again driven primarily by transaction growth. Our U.S. same store sales continued to be primarily driven by transaction growth from our new loyalty program and our strong marketing programming. We also benefited from 1.5% of pricing, which was inclusive of high single digits in California.
Sandeep Reddy: U.S. retail sales increased 6.8%, and International Retail Sales grew 7.7% During Q2, same store sales for the U.S. came in at 4.8%, which wasn't in line with our expectations, but strong comps in the quarter for carryout of 7.9% and delivery of 2.7% were once again driven primarily by transaction. Our U.S. same-store sales continue to be primarily driven by transaction growth from our new loyalty program and our strong We also benefited from 1.5% of the price, which was inclusive of high single digits in California.
Sandeep Reddy: U.S. retail sales increased 6.8% and international retail sales grew 7.7%, excluding the impact of foreign currency.
Sandeep Reddy: During Q2, theme store sales for the U.S. came in at 4.8%, which was in line with our expectations.
Sandeep Reddy: Our strong comps in the quarter for carryout of 7.9% and delivery of 2.7% were once again driven primarily by transaction growth.
Sandeep Reddy: Our U.S. same-store sales continue to be primarily driven by transaction growth from our new loyalty program and our strong marketing programming.
Sandeep Reddy: We also benefited from 1.5% of pricing, which was inclusive of high single digits in California.
Sandeep Reddy: Our sales mix from Uber grew to 1.9% for the quarter. The incrementality of Uber sales continues to be in line with our expectations. Our comp tailwinds were partially offset by a higher carrier, which carries a lower ticket than Duluth.
Unknown Executive: Our sales mixed from U.S. grew to 1.9% for the quarter. The incrementality of U.S. continues to be in line with our expectations. Our cons tailwinds were partially offset by a higher carryout, which carries a lower ticket than delivery.
Sandeep Reddy: Our sales mix from Uber grew to 1.9% for the quarter.
Sandeep Reddy: The incrementality of Uber sales continues to be in line with our expectations.
Sandeep Reddy: Our cocktail wins were partially offset by a higher carryout mix.
Sandeep Reddy: which carries a lower ticket than delivery.
Sandeep Reddy: Shipped into the U.S. Unit Unit, We added 32 net new stores in line with our expectations. This brings our U.S. system store count to 6,906. We remain on track to achieve our 175 or more net store growth targets, and we anticipate opening our 7,000th store by the end of the year. Moving to international, where comp results were generally in line with expectations for the quarter. However, same store sales, excluding foreign currency impact, accelerated to 2.1% in the quarter.
Unknown Executive: Shifting to U.S. unit count; we added 32 net new stores in line with our expectations. This brings our U.S. system store count to 6,906.
Sandeep Reddy: Shifting to U.S. unit count, we added 32 net new stores in line with our expectations.
Sandeep Reddy: This brings our U.S. system store count to 6,906.
Unknown Executive: We'll remain on track to achieve our 175 or more net store growth target in the United States in 2024, and we anticipate opening our 7,000 store by the end of the year. Shifting to international where compresses were generally in line with expectations for the quarter, same store sales, extending foreign currency impact, accelerated to 2.1% in the quarter. The improvement from Q1 was broad-based as we saw improvements in our Europe, Asia, and Middle East markets. Still counts increased by 143 net stores as we finished the quarter with more than 14,000 international stores. Our net store openings were impacted by softness and DPE on gross new store openings and closures.
Sandeep Reddy: We remain on track to achieve our 175 or more net store growth target in the United States in 2024, and we anticipate opening our 7,000th store by the end of the year.
Sandeep Reddy: Shifting to international, where comp results were generally in line with expectations for the quarter.
Sandeep Reddy: Same store sales, excluding foreign currency impact, accelerated to 2.1% in the quarter.
Sandeep Reddy: The improvement from Q1 was broad-based as we saw improvements in our Europe, Asia, and Middle East markets. Store counts increased by 143 net stores as we finished the quarter with more than 14,000 international stores. Our next door openings were impacted by softness, on gross new store openings and closures. Income from operations increased 1.7% in Q2, excluding the negative impact of foreign currency of $2.7 million. This increase was primarily due to higher franchise royalty revenues resulting from global retail sales.
Sandeep Reddy: The improvement from Q1 was broad-based as we saw improvements in our Europe , Asia, and Middle East markets.
Sandeep Reddy: Store counts increased by 143 net stores as we finished the quarter with more than 14,000 international stores.
Sandeep Reddy: Our net store openings were impacted by softness and DPE.
Sandeep Reddy: on Gross New Store Openings and Closures.
Unknown Executive: Income from operations increased 1.7% in Q2, excluding the negative impact of foreign currency of 2.7 million dollars. This increase was primarily due to higher franchise royalty revenues resulting from global retail sales growth. This was partially offset by higher DNA, which was primarily driven by higher labor expenses, as well as the company's worldwide rally expense, as communicated on our last quarterly call. I expect there would turn on this expense to reach extremely high as everyone across our system left engaged, inspired, and ready to drive our hungry for more strategy. Lastly, our margin rate was impacted by a 0.3% headband in Q2.
Sandeep Reddy: Income from operations increased 1.7% in Q2, excluding the negative impact of foreign currency of $2.7 million.
Sandeep Reddy: This increase was primarily due to higher franchise royalty revenues resulting from global retail sales growth.
Sandeep Reddy: This was partially offset by higher GNA, which was primarily driven by higher labor expenses, as well as the company's worldwide rally expenses, as communicated on our last quarterly call. I expect the return on this expense to be extremely high, as everyone across our system left engaged, inspired, and ready to drive our Hungry for More strategy. Lastly, our margin rate was impacted by a 0.3% headwind in Q2, from the tech fee being reduced to $35.5 and our ad fund contribution rate increasing back to 6% as previously forecasted. Turning to our, we continue to expect 7% or more global retail sales growth, excluding the impact of foreign currency, based on the following key items.
Sandeep Reddy: This was partially offset by higher GNA, which was primarily driven by higher labor expenses.
Sandeep Reddy: as well as the company's worldwide rally expense as communicated on our last quarterly call.
Speaker Change: I expect the return on this expense to be extremely high, as everyone across our system left engaged, inspired, and ready to drive our Hungry for More strategy.
Speaker Change: Lastly, our margin rate was impacted by 0.3% headwind in Q2, from the tech fee being reduced to $0.355, and our ad fund contribution rate increasing back to 6% as previously communicated.
Unknown Executive: 2, from the tech-free being reduced to 35.5 cents, and our ad fund contribution rate increasing back to 6% has previously communicated. Now, turning to our outlook, we continue to expect 7% our mobile global retail sales growth, excluding the impact of foreign currency, based on the following key items. First, our 2024 US comp to be above the 3% our more long-term guide, as a result of capitalists in Uber and Lyme T for the full year, and we expect comps to be 3% our more in Q3 and Q4. Specific to Q3, we expect comps to be slightly below what we saw in Q2 on a 1 year basis, as we're expecting 1 less boost week, partially offset by a continued ramp and a world.
Speaker Change: Now turning to our Outlook.
Speaker Change: We continue to expect 7% or more global retail sales growth, excluding the impact of foreign currency, based on the following key items.
Sandeep Reddy: Our 2024 US comp is expected to be above the 3% or more long-term guide as a result of catalysts in Uber and loyalty for the full year, and we expect comps to be 3% or more in Q3 and Q4. Specific to Q3, we expect comps to be slightly below what we saw in Q2 on a one-year basis, as we're expecting one less boost, partially offset by a continued ramp maneuver.
Speaker Change: [inaudible]
Speaker Change: Our 2024 U.S. comp to be above the 3% or more long-term guide as a result of catalysts in Uber and Loyalty for the full year, and we expect comps to be 3% or more in Q3 and Q4.
Speaker Change: Specific to Q3, we expect comms to be slightly below what we saw in Q2 on a one-year basis, as we're expecting one less boost week.
Speaker Change: Partially offset by a continued ramp and overhaul.
Unknown Executive: Second, sales turnover to increase has marketing and awareness grow, and we're expecting to exit the year with an overall sales mix of 3% or more. Third, international comps to accelerate a 3% or more long-term guidance in the back half of the year.
Sandeep Reddy: Sales through Uber will increase as marketing and awareness grow, and we're expecting to exit the year with an overall sales mix of 3% or more. International comps to accelerate to 3% or more long term guidance in the back half of. As Russell noted, we now expect to fall below our 1,100 or more net new store number for 2024. This is due to challenges in our international business, primarily. As we get further visibility into the full effects of DPE's store openings and closures... We will provide an update on the impact on our long-term outlook for 2025. We continue to expect an 8% or more year-over-year increase in operating income, excluding the impact of foreign currency.
Speaker Change: Second.
Speaker Change: Sales for Uber to increase as marketing and awareness grow, and we are expecting to exit the year with an overall sales mix of 3% or more.
Speaker Change: [inaudible]
Russell J. Weiner: International comps to accelerate to 3% or more long-term guidance in the back half of the year. As Russell noted, we now expect to fall below our $1,100 or more net new store number for 2024.
Unknown Executive: As was noted, we now expect to fall below our 1,100 or more net new store number for 2024. This is due to challenges in our international business, primarily related to DPE. As we get further visibility into the full effects of DPE store opens and closes, we will provide an update on the impact to our long-term outlook for 2025 and beyond. We continue to expect an 8% or more year-away increase in operating income, excluding the impact of foreign currency. To highlight some of the components, first, for the year you can expect operating income margins to be relatively flat compared to 2023 and to be down slightly in Q3.
Russell J. Weiner: This is due to challenges in our international business.
Russell J. Weiner: Primarily related to DPE.
Russell J. Weiner: As we get further visibility into the full effects of DPE's store opens and closures,
Speaker Change: We will provide an update on the impact to our long-term outlook for 2025 and beyond. We continue to expect an 8% or more year-over-year increase in operating income, excluding the impact of foreign currency.
Sandeep Reddy: To highlight some of the components, first... For the year, you can expect operating income margins to be relatively flat compared to 2023 and to be down slightly. As a reminder, we are not expecting to see cost leverage in 2024, primarily due to the investments we are making in consumer technology, store technology, and Supply Chain Capacity to support future sales growth. We are now expecting supply chain margins to expand compared to the prior year due to some favorability in the food basket and slightly higher procurement production. However, we are forecasting to come in below the midpoint of our food basket range of 1 to 3 percent.
Speaker Change: To highlight some of the components.
Speaker Change: First.
Speaker Change: For the year, you can expect operating income margins to be relatively flat compared to 2023 and to be down slightly in Q3.
Unknown Executive: As a reminder, we are not expecting to see cost leverage in 2024, primarily due to investments we are making in consumer technology, store technology, and supply chain capacity to support future sales growth. Second, we are now expecting supply chain margins to expand compared to the prior due to some favourability in the food basket and slightly higher procurement productivity. We are forecasting to come in below the midpoint of our food basket range of 1 to 3% for the year. In Q3, expect supply chain margins to be roughly flat compared to the prior and down in Q4.
Speaker Change: As a reminder, we are not expecting to see cost leverage in 2024, primarily due to investments we are making in consumer technology, store technology, and supply chain capacity to support future sales growth.
Speaker Change: Second, we are now expecting supply chain margins to expand compared to the prior year due to some favorability in the food basket and slightly higher procurement productivity.
Speaker Change: We are forecasting to come in below the midpoint of our food basket range of 1-3% for the year.
Sandeep Reddy: In Q3, expect supply chain margins to be roughly flat compared to the prior year and down in Q4. The favorable favorability and supply chain margin is being partially offset by pressure within GNA due to slightly higher investment. We continue to expect our GNA margin as a percentage of global retail sales to be approximately 2.4%.
Speaker Change: In Q3, expect supply chain margins to be roughly flat compared to the prior year and down in Q4.
Unknown Executive: Third, the favourability in supply chain margin is being partially offset by pressure within G&A due to slightly higher investment levels. We continue to expect our G&A as a percentage of global retail sales to be approximately 2.4%. And lastly, we are now expecting the impact of foreign currency to be approximately 1% of operating profit dollars in 2024. We expect this will impact our year-over-year operating profit margins by roughly 20 billion.
Speaker Change: Good!
Speaker Change: The favorability and supply chain margin is being partially offset by pressure within G&A due to slightly higher investment levels.
Speaker Change: We continue to expect our GNA as a percentage of global retail sales to be approximately 2.4%.
Sandeep Reddy: And lastly, we are now expecting the impact of foreign currency to be approximately 1% of operating profit dollars in 2021. We expect this will impact our year-over-year operating profit margins by roughly 20%. As noted in our disclosure this morning, we did not repurchase any shares in the second quarter.
Speaker Change: And lastly, we are now expecting the impact of foreign currency to be approximately 1% of operating profit dollars in 2024.
Speaker Change: We expect this will impact our year-over-year operating profit margins by roughly 20 basis points.
Unknown Executive: Response. As was noted in our disclosures this morning, we did not repurchase any shares in the second quarter. We continue to maintain flexibility due to the volatility of the interest rate environment as we evaluate our upcoming debt maturity in October of 2025.
Speaker Change: As was noted in our disclosures this morning, we did not repurchase any shares in the second quarter.
Speaker Change: We continue to maintain flexibility due to the volatility of the interest rate environment as we evaluate our upcoming debt maturity in October of 2025.
Operator: We continue to maintain flexibility due to the volatility of the interest rate environment as we evaluate our upcoming debt maturity in October of 2025. Thank you. We will now open the line for questions. And as a reminder, ladies and gentlemen, if you have a question at this time, please press star 11 on your telephone.
Unknown Executive: Thank you.
Unknown Executive: We will not open the line for questions. Certainly, MS or mind or ladies and gentlemen, if you have a question at this time, please press star one one on your telephone. Our first question comes from the line of Dennis Geiger from UBS; your question, please.
Speaker Change: Thank you. We will now open the line for questions.
Dennis Geiger: Our first question comes from the line of Dennis Geiger from UBS. Your question, please. Great morning, guys. Thank you.
Speaker Change: Certainly. And as a reminder, ladies and gentlemen, if you have a question at this time, please press star 11 on your telephone. Our first question comes from the line of Dennis Geiger from UBS. Your question, please.
Russell J. Weiner: Wanted to ask a little bit more about loyalty, what you're seeing there, and sort of as we go into the back half of the year, and maybe even into 25, how you guys are thinking about that loyalty program, given the contribution you've seen already this year, and what you're expecting kind of, again, the balance of the year, in the year to how you think about marketing it, promoting it. Thank you, guys. Morning Dennis,
Dennis Geiger: Great morning, guys. Thank you. Appreciate it.
Dennis Geiger: Want to ask a little bit more on the loyalty, what you're seeing there and sort of as we go into the forecast the year and maybe even into 25, how are you guys are thinking about that loyalty program given the contribution you've seen already this year and what you're expecting kind of again balance of the year in the year to how you think about marketing it, promoting it.
Dennis Geiger: Great. Good morning, guys. Thank you. Appreciate it.
Dennis Geiger: I wanted to ask a little bit more on the loyalty.
Dennis Geiger: What you're seeing there and sort of as we go into the back half of the year, and maybe even into 25, how you guys are thinking about that loyalty program, given the contribution you've seen already this year, and what you're expecting kind of, again, balance of the year, in the year to how you think about marketing it, promoting it. Thank you guys.
Unknown Executive: Thank you, guys.
Russell J. Weiner: Thanks for the question. Yeah, I'll tell you loyalty for us this year has just been tremendous. If you think about the objectives that we outlined in our, in our investor day, we said with the new loyalty program, we wanted to drive light users and frequency there. We wanted to continue to obviously drive our delivery customers, obviously, we're doing that. But we also wanted to engage our carryout customers check there.
Unknown Executive: One of Dennis, thanks for the question. Yeah, I'll tell you loyalty for us this year has just been tremendous. If you think about the objectives that we outlined in our and our investor day, we said with the new loyalty program we wanted to drive light users and frequency there, check. We wanted to continue to obviously to drive our direct library customers. Obviously, we're doing that. But we also wanted to gauge our carry out customers, check there. So it really is it's doing every single thing that we had hoped it would. We'll give a number at the end of the year as far as no users.
Speaker Change: Morning, Dennis. Thanks for the question. Yeah, I'll tell you, loyalty for us this year has just been tremendous. If you think about the objectives that we outlined in our Investor Day,
Speaker Change: We said with the new loyalty program we wanted to drive light users and frequency there, check.
Speaker Change: We wanted to continue to obviously to drive our delivery customers, obviously we're doing that.
Russell J. Weiner: So it really is, it's doing every single thing that we had hoped it would. We'll give a number at the end of the year as far as new users are concerned, but I can tell you that the number of new users is increasing.
Speaker Change: But we also want to engage our carryout customers. Check there. So it really is doing every single thing that we had hoped it would. We'll give a number at the end of the year as far as new users, but I can tell you the number of new users is increasing.
Unknown Executive: But I can tell you that the user the number of new users is increasing. I gave a number in my opening remarks that, just to me, is indicative of how this is going. So remember, one of the things we said we were going to do is really use loyalty to drive carry out. So orders from a carry out perspective, orders with loyalty redemptions in the first half of this year. Our twice as high as they were under the old program in the first half of last year. You know, Sunday talked about how our carry out business is doing.
Russell J. Weiner: I gave a number in my opening remarks that just, to me, is indicative of how this is going. So remember, one of the things we said we were going to do is really use loyalty to drive carryout. So orders from a carry out perspective, orders with loyalty redemptions in the first half of this year are twice as high as they were under the old program in the first half of last year. Uh, you know, Sandeep talked about how Arcario Business... And this is one of the big reasons.
Speaker Change: I gave a number in my opening remarks that just, to me, is indicative of how this is going. So remember, one of the things we said we were going to do is really use loyalty to drive carryout.
Speaker Change: So, orders from a carry-out perspective, orders with loyalty redemptions, in the first half of this year.
Speaker Change: are twice as high as they were under the old program in the first half of last year. You know, Sandeep talked about how Arcaria Business is doing.
Russell J. Weiner: So just really on all of the objectives, the loyalty program is delivering what we had hoped. One thing I'll add to that, Dennis, is we've talked about this previously, but this is a multi-year driver of commerce. So this here is just the beginning, and as we did in Peace of the Pyramids...
Unknown Executive: And this is one of the big reasons. So just really on all of the objectives, the loyalty program is delivering what we hoped. One thing I'll add to that, Dennis, is we've talked about this previously, but this is a P.R. driver of Comps for us. So this year is just the beginning, and as we did in piece of the Pirate Awards that we launched in 2014, we saw over three or four years continuous compounding of Comps based on the launch of the program. We expect a similar kind of cadence as we go through this program as well.
Sandeep Reddy: And this is one of the big reasons. So, just really on all of the objectives, the loyalty program is delivering what we had hoped.
Sandeep Reddy: One thing I'll add to that, Dennis, is we've talked about this previously, but this is a multi-year driver of comps for us.
Russell J. Weiner: Launched in 2014, we saw over three or four years continuous compounding of comps based on the launch of the program. We expect a similar kind of cadence as we go through this year. Yeah, and when you think about the health of this quarter and how order counts came in so strong, all of those customers are going into the flywheel of loyalty. So today's orders are really tomorrow's sales, and that's why we're so excited about how the loyalty program is working with everything else that's firing on the business right now. Thank you.
Dennis Geiger: So this year is just the beginning and as we did in Peace of the Fire Awards when we launched it in 2014, we saw over three or four years continuous compounding of comps based on the launch of the program. We expect a similar kind of cadence as we go through this program as well.
Unknown Executive: Yeah, and when you think about the health of this quarter and how water count came in so strong. All of those customers are going into the flywheel of this loyalty program. So today's orders are really tomorrow's sales, and that's why we're so excited about how the loyalty program is working with everything else that's firing on the business right now.
Speaker Change: Yeah, and when you think about the health of this quarter and how order counts came in so strong, all of those customers are going into the flywheel of this loyalty program.
Speaker Change: So today's orders are really tomorrow's sales, and that's why we're so excited about how the loyalty program is working with everything else that's firing on the business right now.
Unknown Executive: Thank you.
Brian John Bittner: And our next question comes from the line of Brian Bittner from Oppenheimer. Your question, please. Thank you. Good morning.
Brian Bittner: And our next question comes in the line of Brian Bittner from Oppenheimer.
Speaker Change: Thank you. And our next question comes from the line of Brian Bittner from Oppenheimer. Your question please.
Brian Bittner: Your question, please. Thank you. Good morning.
Sandeep Reddy: As it relates to the unit growth guidance, I understand that the shortfall is primarily related to the pressures you're witnessing at DPE. But can you dive into this dynamic a bit more? It just seems like a lot has changed versus when you initiated the long-term outlook at the end of last year. So just trying to better understand how the surprise came about so suddenly versus what you were expecting seven, eight months ago. Yeah, Brian, it's Sandeep.
Sandeep Reddy: As it relates to the unit growth guidance, I understand that the shortfall is primarily related to pressures you're witnessing at DPE, but can you dive into this dynamic a bit more? It just seems like a lot has changed, verse when you initiated the long-term outlook at the end of the last year. So just trying to better understand how the surprise came about so suddenly, versus what you were expecting seven years ago. Yeah, Brian, it's Sunday. And so I think we go like to the investigate back in December. I think one of the process that we went through was working with all of our master franchises, including DPE, on the expectations that they have for the business.
Brian John Bittner: Thank you. Good morning. As it relates to the unit growth guidance, I understand that the shortfall is primarily related to pressures you're witnessing at DPE, but can you dive into this dynamic a bit more? It just seems like a lot has changed.
Speaker Change: First, when you initiated the long-term outlook at the end of last year, so just trying to better understand how the surprise came about so suddenly versus what you were expecting seven, eight months ago.
Sandeep Reddy: And so, when you go back to investor day back in December, I think one of the processes that we went through was working with all of our master franchisees, including DP, on the expectations that they have for the fiscal year. And we basically calibrated to that for both the 24-month and the five-year horizon. And at that time, we were completely alive.
Sandeep Reddy: Yeah, Brian , it's Sandeep. And so so I think when you go back to the investor day back in December , I think one of the process that we went through was working with all of our master franchisees.
Sandeep Reddy: And we basically calibrated to that for both 24 and the five-year horizon as well. And at that time, we were completely alive. So then actually we got into the end of the Q1 call, and we got it to send the second quarter. And we saw it seeing that relative to our expectations and cadence, both new store openings as well as closures really started increasing from DPE. And as we saw, we continue to engage with the DPE team to validate the forecast that we had for the year. And it became pretty clear as we assumed and through that conversation and discussion that there was not only the risk to the second quarter that we were seeing.
Speaker Change: Including DP on the expectations that they have for the business.
Speaker Change: And we basically calibrated to that for both 24 and the five-year horizon as well.
Sandeep Reddy: So then actually, we got into the end of the Q1 call, and then we got into the second quarter, and we started seeing that, relative to our expectations and cadence... Both new store openings as well as closures really started increasing, and as we saw that, we continued to engage with to validate the forecast that we had for the year. And it became pretty clear as we actually went through that conversation and discussion that there was not only a risk to the second quarter that we were seeing.
Speaker Change: And at that time, we were completely aligned. So then actually, we got into the end of the Q1 call, and then we got into the second quarter. And we started seeing that relative to our expectations and cadence,
Speaker Change: Both new store openings as well as closures really started increasing from DBE and as we saw that we continued to engage with the DBE team.
Speaker Change: to validate the forecast that we had for the year. And it became pretty clear as we actually went through that conversation and discussion that there was not only the risk to the second quarter that we were seeing.
Sandeep Reddy: But clearly, the outlook was going to be impacted as well. And in fact, just yesterday, I think DPE put out a release with a number of closures that they outlined for the Japan and France markets, in particular, which they're targeting for their first stop, which is our second half, which therefore will land in this fiscal year. So apart from what we've seen in the second quarter, we expect to see more pressure in the second half of this year.
Sandeep Reddy: But clearly, the outlook was going to be impacted as well. And in fact, just yesterday I think DPE put out a release with the number of closures that they outlined in the Japan and France market in particular. Would they targeting for their first start, which is our second half, would therefore will land in this fiscal year. So apart from what we've seen in the second quarter, we expect to see more pressure in the second half of this year. So I think when you take the collective of all of that, it was a pretty mature update that we were going to see in the numbers for this year, and we further appropriate to update our guidance for 2024.
Speaker Change: But clearly the outlook was going to be impacted as well and in fact just yesterday I think DPE put out a release with
Speaker Change: With a number of closures that they outlined in the Japan and France market in particular, which they're targeting for their first half, which is our second half.
Speaker Change: What would therefore will land in this fiscal year? So apart from what we've seen in second quarter We expect to see more pressure in the second half of this year. So I think when you take the collective of all of that
Sandeep Reddy: So I think when you take the collective of all of that, it was a pretty material update because I think as we go through the process of not just the closures but the potential open, the timing of it could potentially shift between now fiscal 24 and fiscal 25. And that's why we're temporarily suspending guidance on the long-term outlook as well, apart from this. So that's kind of what went on in the background, Brian, so you understand that.
Speaker Change: It was a pretty material update that we were going to see in the numbers for this year and we felt it appropriate to update our guidance for 2024 and also you will notice the range is 175 to 275. Why is the range that big?
Sandeep Reddy: And, and also you've noticed the range is one seventy-five to two seventy-five. Why is the range that big? Because I think as we go through the process of not just the closures with the potential openings, the timing of it could potentially shift between our fiscal twenty-four and fiscal twenty-five. And that's why we're temporarily suspending guidance on the long-term outlook as well, apart from this year. So that's kind of what went on in the background, Brian, so you understand that. But I think one of the things I want to just come back to is when we look at our long term guide, I mean we're talking about maintaining our GRS grow to seven percent plus.
Speaker Change: Because I think as we go through the process of not just the closures, but the potential openings...
Speaker Change: The timing of it could potentially shift between now fiscal 24 and fiscal 25, and that's why we're temporarily suspending guidance on the long-term outlook as well, apart from this year.
Speaker Change: So that's kind of what went on in the background, Brian , so you understand that.
Russell J. Weiner: But I think one of the things I want to just come back to is when we look at our long-term guide, I mean, we're talking about maintaining our GRS growth of 7% plus and our operating income guide of 8% plus. And the reason for this is that the store closures that we're talking about are very low-volume stores. And so that's why we're very confident in our operating income guidance, and we are reiterating that, and as you saw... And Brian, I would just add to that, I think, you know, what this shows me is, I don't know how many levers we have to grow this business.
Speaker Change: But I think one of the things I want to just come back to is, when we look at our long-term guide, I mean, we're talking about maintaining our GRS growth of 7% plus, and our operating income guide of 8% plus. And the reason for this is, the store closures that we're talking about are very low-volume stores.
Sandeep Reddy: And, and our operating income guide of eight percent plus. And the reason for this is the store closes that we're talking about are very low volume stores. So, when you actually put it all together, the aggregate impact to operating income is really immaterial in the grand scheme of things. And so that's why we're very confident in our operating income guidance. And we're reiterating that, and as you saw this morning. And Brian, I would just add to that, I think you know what this shows me is how many levers we have to grow this business. And so you know, certainly we're working with DPE.
Speaker Change: So, when you actually put it all together, the aggregate impact to operating income is really immaterial in the grand scheme of things, and so that's why we're very confident in our operating income guidance, and we're reiterating that, as you saw this morning.
Speaker Change: Yeah, and Brian , I would just add to that, I think, you know, what this shows me is...
Russell J. Weiner: And so, you know, certainly we're working with DPE, but let me just put some of this in perspective. So our sales and stores are still on target for the 7%, I'm sorry, our sales and profit for the 7% plus and the 8%. And with that, those headwinds and DPE, that means we have a lot of other things going on. And so, maybe I'll start with development.
Speaker Change: I don't know how many levers we have to grow this business and and so you know certainly we're we're working with with DPE but let me just put some of this in perspective.
Sandeep Reddy: Let me just put some of this in perspective. Joseph, our sales and stores are still on target for the 7% of our sales and profit for the 7% plus and the 8% plus. And with that, those headwinds and DBE, that means we have a lot of other things firing.
Speaker Change: So our sales and stores are still on target for the 7%, I'm sorry, our sales and profit for the 7% plus and the 8% plus.
Speaker Change: And with those headwinds in DPE, that means we have a lot of other things firing. And so just maybe I'll start with development.
Sandeep Reddy: And so just maybe I'll start with development. So, as the same time as we have the TPE news, we have news at China and India are increasing their outlook. We've got today, 14,000 stores; half of those stores we've opened since 2015. And so the momentum we have on our way to 40,000 stores, which is a lot more room for us, is tremendous. And then when you think about our development in the U.S., obviously, we're, we're the Sandeep Sandeep Sandeep's remarks. 175 plus is is still our target this year that we're going to hit. And when you think about the strengths of development, openings are really important, so we're closing.
Russell J. Weiner: So at the same time as we have this TBE news, we have news that China and India are increasing their outlook. We've got today, you know, 14,000 stores; half of those stores we've opened in 2015.
Speaker Change: So, at the same time as we have this TBE news, we have news that China and India are increasing their outlook.
Russell J. Weiner: And so the momentum we have on our way to 40,000 stores, which is a lot more room for us, is tremendous. Then when you think about our development in the U.S., obviously, as Sandeep said in his remarks, 175 plus is still our target this year that we're going to hit. And when you think about the strength of development, openings are really important. So are closings, and in the trailing 12 months in the US, we've closed, you know, only seven stores out of a total of about 7,000.
Speaker Change: We've got today 14,000 stores, half of those stores we've opened since 2015, and so the momentum we have on our way to 40,000 stores, which is a lot more room for us, is tremendous.
Speaker Change: And then when you think about our development in the U.S., obviously we're, as Sandeep said in his remarks, 175 plus is still our target this year that we're going to hit.
Speaker Change: And when you think about the strength of development, openings are really important, so are closings. And in the trailing 12 months in the U.S., we've closed, you know, only 7 stores out of a total of about 7,000.
Sandeep Reddy: And in the trailing 12 months in the U.S., we've closed, you know, only 7 stores out of a total of about 7,000. And so the development, I think, overall, is pretty healthy. And like I said, we've got these other things firing at the same time, which is why our sales and profit numbers are still coming in at 4K.
Russell J. Weiner: And so development, I think, overall, is pretty healthy. And like I said, we've got these other things firing at the same time, which is why our sales and profit numbers are still coming in at forecast. Thank you. And our next question comes from the line of David Tarantino from Baird. Your question, please. Hi, good morning.
Speaker Change: And so development, I think, overall is pretty healthy, and like I said, we've got these other things firing at the same time, which is why our sales and profit numbers are still coming in at forecast.
David Tarantino: Thank you. And our next question comes from the line of David Tarantino.
Speaker Change: Thank you.
David Tarantino: For bear, your question, please. Hi, good morning. My questions are follow up, Russell, on your comments about the outlook for the year being unchanged. You know, I guess, you know, we've seen signs that consumer spending is flowing in certainly parts of the restaurant industry. And it feels like the degree of difficulty in the U.S. is increased.
Speaker Change: And our next question comes from the line of David Tarantino from Baird. Your question, please.
David E. Tarantino: My question is a follow-up, Russell, on your comments about the outlook for the year being unchanged. You know, I guess, yeah, we've seen signs that consumer spending is slowing, and certainly in parts of the restaurant industry. And it feels like the degree of difficulty in the US has increased.
David E. Tarantino: Hi, good morning. My question is a follow-up, Russell, on your comments about the outlook for the year being unchanged. You know, I guess, you know, we've seen
David E. Tarantino: Signs that consumer spending is slowing, certainly in parts of the restaurant industry, and it feels like the degree of difficulty in the U.S. has increased, so I just wanted to ask
David Tarantino: So I just wanted to ask you to give some commentary on why you're so confident and holding those targets for this year. And whether you think the degree of difficulty is higher or unchanged versus what you were thinking previously. Thanks. Yeah, thanks, David. To me, the best predictor of the future. You know, I have a lawyer in the room who probably tells me I can't say this. It is what's happened. And, you know, you're right about consumer spending slow. But let's think about what's happened with that as a backdrop. We've had, we've grown orders in our delivery business, our carry-out business, every income cohort.
Russell J. Weiner: So I just wanted to ask you to give some commentary on why you're so confident in holding those targets for this year and whether you think the degree of difficulty is higher or unchanged versus what you were thinking previously. Yeah, thanks, David. You know, to me, the best predictor of the future, even though I have a lawyer in the room who probably tells me I can't say this, is what's happened.
Speaker Change: You to give some commentary on on why you're so confident in holding those targets for this year and and Whether you think the degree of difficulty is is higher or unchanged versus what you were thinking previously. Thanks
Russell J. Weiner: And, and, you know, you're right about consumer spending being slow. But let's think about what's happened with that as a backdrop. We've had orders in our delivery business, our carry out business, every income cohort, we haven't talked about international, but we've grown order counts in international. And so that's what's going on in an economy where folks are kind of maybe struggling to decide what to buy.
Speaker Change: Thanks, David. To me, the best predictor of the future, even though I have a lawyer in the room who probably tells me I can't say this, is what's happened.
Speaker Change: You know, you're right about consumer spending slow, but let's think about what's happened with that as a backdrop, is we've had, we've grown orders in our delivery business, our carryout business, every income cohort, we haven't talked about international, but we've grown order count in international.
Unknown Executive: We haven't talked about it in national, but we've grown order count in international. And so that's what's going on in an economy where folks are kind of maybe struggling to decide what to buy. And so if order counts are positive in that scenario, then at some momentum, swing is eventually. I expect our momentum to continue. So what you do when times are tough. To me, that's talked about the strengths of the brand.
Russell J. Weiner: And so if order counts are positive in that scenario, then as the momentum, you know, swings, eventually, I expect our momentum to continue. So what you do when times are tough, To me, that talks about the strength of the brand, and that's why I just could not be more excited about how we delivered the results for the quarter. Thank you.
Speaker Change: And so that's what's going on in an economy where folks are kind of maybe struggling to decide what to buy. And so if order counts are positive in that scenario, then as the momentum, you know, swings eventually, I expect our momentum to continue. So what you do when times are tough...
Unknown Executive: And that's why I just could not be more excited about how we delivered the results for the quarter.
Speaker Change: To me, that talks about the strength of the brand, and that's why I just could not be more excited about how we delivered the results for the quarter.
Andrew Michael Charles: Thank you, and our next question comes from the line of Andrew Charles from TV Cowan.
Andrew Michael Charles: And our next question comes from the line of Andrew Charles from TD Cowan. Your question, please. Great, thank you.
Speaker Change: Thank you. And our next question comes from the line of Andrew Charles from TD Cowan. Your question please.
Andrew Charles: Your question, please. Great, thank you. Sandeep, you talked about how the 3Q comps in the U.S. are expected to trail 2Q levels, and just given these are comparisons, I'm curious if that reflects what you're observing so far this quarter or it's more just forward looking around your expectation, given one less boost week in 3Q.
Sandeep Reddy: Sandeep, you talked about how the 3Q comps in the US are expected to trail 2Q levels. And just given these your comparisons, I'm curious if that reflects what you're observing so far this quarter, or it's more just forward looking around your expectation given one less boost week in 3Q. Andrew, thanks for the question.
Andrew Michael Charles: Great, thank you. Sandeep, you talked about how the 3Q comps in the U.S. are expected to trail 2Q levels, and just given these are comparisons, I'm curious if that reflects what you're observing so far this quarter, or it's more just forward looking around your expectation given one less boost week in 3Q.
Andrew Michael Charles: Andrew, thanks for the question. I think no, it's more about what I talked about in the prepared remarks, which is we do have one less boost week. We do have the ramp and over, but on that basis, it's slightly below what we saw in Q2, the expectation for Q3.
Sandeep Reddy: You know, I think, no, it's more about what I talked about in the prepared remarks, which is we do have one less boost week. We do have the ramp in Uber, but on a net basis, it's slightly below what we saw in Q2, and the expectation for Q3. But I'll go back to Russell's previous answer.
Sandeep Reddy: Andrew, thanks for the question. I think it's more about what I talked about in the prepared remarks, which is we do have one less boost week, we do have the ramp in Uber, but on a net basis it's slightly below what we saw in Q2, our expectation for Q3. But I'll go back to Russell's previous answer.
Sandeep Reddy: But I'll go back to Russell's previous answer. We are seeing tremendous performance in terms of transaction growth for the entire first half, and we're expecting to see that same performance in the entire second half. And so we're very confident in the ability of our business to deliver the kind of momentum that you've seen already in the first half in the back half, including Q3.
Sandeep Reddy: We are seeing tremendous performance in terms of transaction growth for the entire first half, and we're expecting to see that same performance in the entire second half. And so we're very confident in the ability of our business to deliver the kind of momentum that you've seen already in the first half, in the back half, including Q3. Thank you.
Russell J. Weiner: We are seeing tremendous performance in terms of transaction growth for the entire first half and we're expecting to see that
Russell J. Weiner: Same performance in the entire second half.
Russell J. Weiner: and so we're very confident in
Russell J. Weiner: And the ability of our business to deliver the kind of momentum that you've seen already in the first half, in the back half, including Q3.
David Palmer: Thank you, and our next question comes from the line of David Palmer from Evercore. Your question, please.
David Sterling Palmer: And our next question comes from the line of David Palmer from Evercore. Your question, please. Thanks, good morning.
Speaker Change: Thank you and our next question comes from the line of David Palmer from Evercore. Your question please.
David Sterling Palmer: Thanks, good morning. I guess the question is about. I'll make it a kind of a two-parter. It looks like the sales trends are pretty volatile in the U.S. From the data that we see, for example, things looked like they were weaker in April when you didn't have sort of a value-forward message like emergency pizza or the $3 tip. Could you kind of reflect on the quarter and what you're seeing in terms of the consumer response to stuff? And maybe give us a sense of what you think is working and not working in the U.S. And then separately, I think people are going to be concerned about the fourth quarter.
Russell J. Weiner: I guess the question is about I'll make it a kind of a two parter. It looks like the sales trends are pretty volatile in the US from the data that we see. You know, for example, things look like they were weaker in April when you didn't have sort of a value forward message like emergency pizza or the $3 tip. Could you kind of reflect on the quarter and what you're seeing in terms of the consumer response to stuff, and maybe, you know, give us a sense of what you think is working and not working in the US?
David Sterling Palmer: Thanks, good morning.
David Sterling Palmer: I guess the question is about, I'll make it a kind of a two-parter.
David Sterling Palmer: It looks like the sales trends are pretty volatile in the U.S.
David Sterling Palmer: from
Speaker Change: The data that we see...
Speaker Change: You know, for example, things look like they were weaker in April .
Speaker Change: When you didn't have sort of a value forward message, like emergency pizza or the $3 tip.
Russell J. Weiner: And then separately, I think people are going to be concerned about the fourth quarter if the third quarter is worse than this quarter. Maybe, you know, let's say you do 4% in the third quarter. I think people are going to be concerned about you holding that 3% plus in the fourth quarter, given the comparison. So maybe you can address both of those. Thanks. Yes, maybe I'll give it a shot, Sandeep, if I miss anything.
Speaker Change: Could you kind of reflect on the quarter and what you're seeing in terms of the consumer response to stuff?
Speaker Change: and maybe.
Speaker Change: you know
Speaker Change: Give us a sense of what you think is working and not working in the U.S.
Speaker Change: And then separately, I think people are going to be concerned about the fourth quarter, if the third quarter is worse than this quarter, maybe, you know, let's say you do a 4% in the third quarter, I think people are going to be concerned about you holding that 3% plus in the fourth quarter, given the comparison. So maybe you can address both of those. Thanks.
David Palmer: If the third quarter is worse than this quarter, maybe, you know, let's say you do a 4% in the third quarter, I think people are going to be concerned about you holding that 3% plus in the fourth quarter. Given the comparison, so maybe you can address both of those. Thanks.
Russell Weiner: Yes, or I'll maybe I'll give it a shot, and Sandy if I miss anything. You know, as far as the volatility in the short term, I think, you know, we look at, you know, quarters not days and obviously years as well. And there are always some bouncing this based on everything from, you know, whether to what we put out there. And so I like the second part of your question, which is kind of big picture: what's working and what's not working. What's working is the hunger for more strategy. And I'll give you an example, maybe using one of the things we are doing this year, as we talked about, was we're going to launch two new products.
Russell J. Weiner: You know, as far as volatility in the short term, I think, you know, we look at, you know, quarters, not days, and obviously years as well. And there is always some volatility based on everything from, you know, weather to what we put out there. And so I like the second part of your question, which is kind of the big picture, what's working and what's not working. What's working is the hungry for more strategy.
Speaker Change: Yes, maybe I'll give it a shot, Sandeep, if I miss anything. You know, as far as the volatility in the short term, I think, you know,
Speaker Change: We look at, you know...
Speaker Change: quarters, not days, and obviously years as well. And there are always some bounciness based on everything from, you know, weather to what we put out there. And so I like your the second part of your question, which is kind of big picture, what's working and what's not working. What's working is the hungry for more strategy.
Russell J. Weiner: And I'll give you an example, maybe using, you know, one of the things we are doing this year, as we talked about, was we're going to launch two new products, so we just launched the New York style. New York style pizza is all about the most delicious food.
Speaker Change: And I'll give you an example maybe using, you know, one of the things we are doing this year as we talked about was we're going to launch two new products. So we just launched the New York style pizza.
Russell J. Weiner: So we just launched the New York Style pizza. New York style pizza is all about the most delicious food. It's an innovation with intent. There are, believe it or not, some people out there who don't love our traditional crust. So this is an incremental crust, more foldable; hopefully, bring new people in the fold. At the same time, that new product is delivered in better delivery times than it was two years ago. That's operational action. One, it's part of our mission match for motion. It's also part of our loyalty program, renowned value. And so what we're doing, David, is really tethering all these things together.
Speaker Change: New York-style pizza is all about the most delicious food. It's an innovation with intent. There are, believe it or not, some people out there who don't love our traditional crust. So this is an incremental crust, more foldable, hopefully bring new people in the fold.
Russell J. Weiner: It's an innovation with intent. There are, believe it or not, some people out there who don't love our traditional crust. So this is an incremental crust, more foldable, and hopefully, it will bring new people into the fold. At the same time, that new product is delivered in better delivery times than it was two years ago. That's operational excellence. It's part of our MIPS and MATCH promotion.
Speaker Change: At the same time, that new product is delivered in better delivery times than it was two years ago. That's operational excellence.
Russell J. Weiner: It's also part of our loyalty program, Renown Value. And so what we're doing, David is really tying all these things together. There's never anything that's firing on one cylinder on its own.
Speaker Change: It's part of our Mix and Match promotion. It's also part of our loyalty program, Renown Value.
Speaker Change: And so what we're doing, David, is really tethering all these things together. There's never anything that's firing one cylinder on its own. There truly is a domino effect of...
Russell Weiner: There's never anything that's firing one cylinder on its own. There truly is a domino effect of connectivity between all the programs we have going on right now. From a not working perspective, I mean, we're always hungry for more. That's kind of the bumper sticker of this company. But I've been here 15, 16 years, and I know what drives the business. It's orders, it stores, it's market share. And the orders that you've seen, the stores that you're seeing are just think about what traditional growth has been for the pizza category. We are going to be big winners from a share perspective.
Russell J. Weiner: There truly is a domino effect of connectivity between all the programs we have going on right now. From a not working perspective, I mean, we're always hungry for more. That's that's kind of the bumper sticker for this company. But I've been here 15, 16 years, and I know what drives the business. It's orders, it's stores, it's market share. And the orders that you've seen, the stores that you're seeing are just think about what traditional growth has been for the pizza category. We are going to be big winners from a share perspective.
Speaker Change: connectivity between all the programs we have going on right now. From a not working perspective, I mean, we're always hungry for more. That's, that's, that's kind of the bumper sticker of this company.
David: But I've been here 15-16 years and I know what drives the business.
David: It's orders, it's stores, it's market share.
Speaker Change: And the orders that you've seen, the stores that you're seeing, are, just think about what traditional growth has been for the pizza category. We are going to be big winners from a share perspective.
Russell J. Weiner: And once you do that, everything grows, your franchisee profitability grows, your advertising fund grows, you get a moat. And our moat is filled right now with orders and stores and, and franchisee profit. David, I'll just add on to just clarify a couple of points. I mean, you asked about what you talked about volatility in sales trends in the US. We didn't see any volatility.
Russell Weiner: And once you do that, everything grows; your franchisee, profitability grows, your advertising fun grows, you get a moat. And our moat is filled right now with orders and stores and franchisee profits.
Speaker Change: And once you do that, everything grows. Your franchisee profitability grows, your advertising fund grows, you get a moat. And our moat is filled right now with orders and stores and franchisee profits.
Sandeep Reddy: David, I'll just try to find a couple of the points. Many asked about what it talked about volatility and sales trends in the US. We didn't see any volatility. We saw a very steady cadence. And the steady cadence of sales is really driven by the flywheel that Russell talked about on the loyalty program and the frequency that's continuing to build from there. We've seen that pretty consistently across the year, frankly, including the second quarter. So we don't see the volatility at all. And I think the other question that you asked was the confidence in the Q4 comp.
David: And David, I'll just tag on, just clarifying a couple of the points. I mean you asked about, you talked about volatility in sales trends in the U.S. We didn't see any volatility. We saw a very steady cadence.
Sandeep Reddy: We saw very steady sales, and the steady cadence of sales is really driven by the flywheel that Russell talked about in the loyalty program and the frequency that's continuing to build from there. We've seen that pretty consistently across the year, including the second quarter.
David: And the steady cadence of sales is really driven by...
David: The flywheel that Russell talked about on the loyalty program and the frequency that's continuing to build from there, we've seen that pretty consistently across the year, frankly.
Sandeep Reddy: So we don't see the volatility at all. And I think the other question that you asked was confidence in the Q4 comp. And as I said in the prepared remarks, we expect both Q3 and Q4 to be above 3%, offset by Uber's Wrap.
David: including the second quarter. So we don't see the volatility at all.
Sandeep Reddy: And, as I said in prepared remarks, we expect both Q3 and Q4 to be above the 3%. So we just explained that Q3 maybe started below Q2 because the timing of the number of boost weeks offset by who was ranked. Now going to Q4, one of the things we talked about earlier was that loyalty is going to be a multi-year driver for us. So sure, we're lapping in Q4 the loyalty program launch, but we still expect to be seen tailwinds from the compounding impact from the loyalty program in Q4. So, in addition, we'll continue to build.
Speaker Change: And I think the other question that you asked was the confidence in the Q4 comp, and as I said in the prepared remarks,
Speaker Change: We expect both Q3 and Q4 to be above the 3%, but we did explain that Q3 may be slightly below Q2 because of the timing of the number of boost weeks.
Sandeep Reddy: Now going to Q4... One of the things we talked about earlier was that loyalty is going to be a multi-year driver. So sure, we're lapping in the queue for the Loyalty Program launch, but we still expect to be seeing tailwinds and the compounding impact from the Loyalty Program in. In addition, Uber continues to build. And so with both those drivers, there's every case to look at 3% or more is very, very much within the fourth quarter, and we're always hungry for more. So the more we do, the better it is. So we're really confident and because this is all transaction driven, it's really driving very strong.
Speaker Change: Offset by Uber's ramp. Now going to Q4.
Speaker Change: One of the things we talked about earlier was that loyalty is going to be a multi-year driver for us.
Speaker Change: So sure, we're lapping in Q4 the Loyalty Program launch, but we still expect to be seeing tailwinds and the compounding impact from the Loyalty Program in Q4. In addition...
Sandeep Reddy: And so, with both those drivers, there's every case to look at 3% or more; is very, very much within reach in the fourth quarter. And we all need a country for more. So the more we do, the better it is. So we're really confident. And because this is all transaction-driven, it's really driving very strong economics. So franchisee profitability continues to grow. And I think that's actually driven by a significant performance on the supply chain side also, which is what you're seeing on the supply chain financials that's going into the franchisee profits. So overall, very confident of our output for the back-up of the year.
Speaker Change: Uber continues to build and so with both those drivers, there's every case to look at 3% or more is very, very much within reach in the fourth quarter and we're always hungry for more. So the more we do, the better it is.
Speaker Change: So, we're really confident, and because this is all...
Speaker Change: Transaction driven. It's it's really driving very strong economics.
Sandeep Reddy: So franchisee profitability continues to grow, and I think that's actually driven by a significant performance on the supply chain side also, which you're seeing on the supply chain financials that are going into the franchisee. So overall, I'm very confident of our outlook for the back. Thank you.
Speaker Change: So, franchisee profitability continues to grow, and I think that's actually driven by a significant performance on the supply chain side also, which you're seeing on the supply chain financials that's going into the franchisee profits. So, overall, very confident of our outlook for the back half of the year.
Lauren Danielle Silberman: And our next question comes from the line of Lauren Silberman from Deutsche Bank. Your question, please. Thank you very much.
Unknown Executive: Thank you.
Lauren Danielle Silberman: And our next question comes from the line of Lauren Silverman from Deutsche Bank.
Speaker Change: Thank you. And our next question comes from the line of Lauren Silberman from Deutsche Bank. Your question, please.
Lauren Silverman: Your question, please. Thank you very much. I wanted to ask about the value strategy. So you talk about the one booth peak in the third quarter that leads to, I believe, one in the fourth quarter clearly driving strong performance given the value focus in the industry. See what flexibility.
Russell J. Weiner: I wanted to ask about the value strategy. You talked about the one boost week in the third quarter that led to, I believe, one in the fourth quarter, clearly driving strong performance given the value focus in the industry. P.A. What? Flexibility.
Lauren Danielle Silberman: Thank you very much. I wanted to ask about the value strategy. You talked about the one boost week in the third quarter that leads to, I believe, one in the fourth quarter. Clearly driving strong performance, given the value focus in the industry.
Russell J. Weiner: What flexibility do you have to further increase promotional activity? And then, are you seeing any increase in value mix, and how much is going through DC? Yeah, Lauren, thanks for the question.
Speaker Change: The name was... FLEXIBILITY
Lauren Danielle Silberman: What flexibility do you have to further increase promotional activity? And then, are you seeing any increase in value mix and how much is going through deals?
Russell J. Weiner: I think what we're doing in terms of value is very special. And it's very different than what you're seeing in the industry right now, which, you know, I think folks are, it's clear that there's been a price taken, and folks are dealing back kind of individual items, telling customers, hey, this is what you can get for value. What we've done, and we've done this since, you know, 2009 when we launched mix and match, our mix and match offer. Value is two things. Value is the price, but it's the price for what you want.
Lauren Danielle Silberman: Yeah, Lauren, thanks for the question. I think what we're doing in value is very special.
Lauren Danielle Silberman: And it's very different than what you're seeing in the industry right now, which, you know, I think folks, it's clear that, you know, there's been price taken, and folks are dealing back kind of individual items, telling customers, hey, this is what you can get on value.
Lauren Danielle Silberman: What we've done, and we've done this since 2009 when we launched Mix & Match, our Mix & Match offer...
Lauren Danielle Silberman: Value is two things. Value is the price, but it's the price for what you want.
Lauren Danielle Silberman: If the price for what you want is high and the price for something you don't want is not high, that doesn't really do much. And so when you think about all of our platforms, you think about pizza, you think about pasta, sandwiches, desserts, salads, breads, chickens, all of those things.
Russell J. Weiner: If the price for what you want is high and the price for something you don't want is not high, that doesn't really do much. And so when you think about all of our platforms, you think about pizza, you think about pasta, sandwiches, desserts, salads, breads, chicken, all of those things consistently have been part of our promotional value play since the end of 2009.
Lauren Danielle Silberman: consistently have been part of our promotional value play.
Russell J. Weiner: And having that consistency, when people wake up in the morning and decide where they want to order, they know that they can trust Domino's. That trusted value is leading to the order count you're seeing, and then they become part of that loyalty flywheel. And so I just, I think it's important to make sure that our approach to value is not just price. It's about price for what people actually want to order, and that's, as you've seen over this time period, a very sustainable way to grow. Thank you.
Lauren Danielle Silberman: Since the end of 2009, and having that consistency, when people wake up in the morning and decide where they want to order, they know that they can trust Domino's.
Lauren Danielle Silberman: that trusted value is leading to the order count you're seeing. And then they become part of that loyalty flywheel. And so I just, I think it's important to make sure you
Lauren Danielle Silberman: We explain.
Lauren Danielle Silberman: Our approach to value is not just price.
Lauren Danielle Silberman: It's about price for what people actually, you know, want to order. And that's, as you've seen over this time period, a very sustainable way to grow.
Gregory Ryan Francfort: And our next question comes from the line of Gregory Francfort from Guggenheim. Your question, please? Hey, Russell, I love that the domino effect reference there. But I just had a question about the incrementality of Uber and just some of the commentary there. I think you've had it in for about nine months.
Lauren Danielle Silberman: Thank you. And our next question comes from the line of Gregory Francfort from Guggenheim. Your question, please.
Russell J. Weiner: Can you talk about what you've learned and maybe how you're changing some of the marketing message over the last maybe three or six months and then any update on thoughts on DoorDash into next year? Should we still expect something on that and maybe what the timing would look like? Thanks.
Gregory Ryan Francfort: Hey, Russell, I love that the domino effect reference there, but I just had a question on the incrementality of Uber and just some of the commentary there. I think you've had it in for about nine months.
Speaker Change: Can you talk about what you've learned and maybe how you're changing some of the marketing message over the last maybe three or six months and then any update on Thoughts on DoorDash into next year. Should we still expect some something on that and maybe what the timing would look like? Thanks
Russell J. Weiner: Thanks, Greg. And we're going to send you the domino effect bumper sticker after this. So you want to, you want to look out for that. You know, Uber is performing as we thought it would. It's doing so in a little bit of a different way. And I talked about it last quarter, but I think it's worth bringing up again.
Speaker Change: Thanks, Greg. And we're going to send you the Domino Effect bumper sticker after this, so you want to look out for that. You know, Uber is performing as we thought it would. It's doing so in a little bit of a different way. And I talked about it last quarter, but I think it's worth bringing up again.
Speaker Change: So, first, from a sales perspective, you know, it's about 1.9% of sales and, you know, we're tracking towards our goal this year of 3% of sales.
Russell J. Weiner: So first, from a sales perspective, you know, it's about 1.9% of sales. And, you know, we're tracking towards our goal this year of 3% of sales. But how it's coming is a little bit different.
Speaker Change: How this company is a little bit different, and what we've seen is really an uptick more in a high-low strategy. Originally, you know, our approach was, okay, if we have a kind of an everyday low price, not compared to our channels, right, still the lowest price loyalty program on our channel, that would be the way to win.
Russell J. Weiner: And what we've seen is really an uptick more in a high-low strategy. Originally, you know, our approach was, okay, if we had a comment and an everyday low price, not compared to our channels, right, still the lowest price, lowest in program in our channel, that'd be the way to win. But actually, it's whether it's how customers shop, or part of the algorithm, or a little bit of both. Starting out with a slightly higher price that you can discount from is a way to get more eyeballs, and so, you know, we've continued to test and pivot that way, and you're seeing it in the results.
Speaker Change: But actually, it's whether it's how customers shop, or part of the algorithm, or a little bit of both.
Speaker Change: Starting out with a slightly higher price that you can discount from is a way to get more eyeballs, and so we've continued to test and pivot that way, and you're seeing it in the results.
Russell J. Weiner: So again, the year is folding like we thought it would, and so what that leaves us with, your question about DoorDash, is that the current exclusivity with Uber runs through Q1. At that point, whether or not we renew is our choice.
Speaker Change: So again, the year is folding like we thought it would, and so what that leaves us with, your question about DoorDash, is the current exclusivity with Uber runs through Q1,
Russell J. Weiner: And so we'll be looking at the economics and potential at that point. But that would be the time to think about whether we stay exclusive or do we open up to, you know, DoorDash or other aggregators? We've talked about the billion-dollar opportunity for us is really our fair share on all of the aggregators, which in about three years or so is what we hope to get.
Speaker Change: At that point, whether or not we renew is our choice, and so we'll be looking at the economics and potential at that point.
Speaker Change: But that would be the time to think about, do we stay exclusive or do we open up to, you know, a DoorDash or other aggregators? We've talked about the billion-dollar opportunity for us is really our fair share on all of the aggregators, which in about, you know,
Speaker Change: Three years or so is what we hope to get to.
John William Ivankoe: Thank you. And our next question comes from the line of John Ivankoe from J.P. Morgan. Your question, please. Hi.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of John Ivankoe from J.P. Morgan. Your question please.
Russell J. Weiner: Thank you. You know, especially in the context of closures in France and in Japan, I ask about the impact of store splits in the U.S. We're currently at around a two and a half percent store growth rate, you know, in the U.S., which is actually high for a fairly mature brand. So, you know, talk about what you see as net, I guess, cannibalization, whatever you want to call it, the negative impact on same-store sales from store splits.
John William Ivankoe: Hi, thank you. You know, it's especially in the context of closures, you know, in France and, you know, in Japan, I ask about
John William Ivankoe: impacts of store splits in the U.S. You're currently at around a two and a half percent.
Speaker Change: Store Growth Rate in the U.S., which is actually high for a fairly mature brand. So talk about what you see as net, I guess, cannibalization, whatever you want to call it, what negative impact on same-store sales from store splits.
Russell J. Weiner: Is there any learning on either side of the Atlantic or either side of the Pacific, as it may be, in terms of who is learning from who in terms of how markets can be penetrated? Is it that they didn't necessarily follow the same site model that you do?
Speaker Change: Is there any learning, you know, on either side of the Atlantic, or either side of the Pacific as it may be?
Speaker Change: In terms of who is learning from who in terms of how markets can be penetrated, is that...
Russell J. Weiner: Do you have any opportunities to kind of look at them in terms of how densely markets can be penetrated? I just want to, you know, I guess, have a sense of your level of risk acceptance in terms of hitting your U.S. store targets without overly encroaching on your existing current asset base. Thank you. Yeah, John, I'll take that.
Speaker Change: that they didn't necessarily follow the same site model that you do. Do you have any opportunities to kind of look at them in terms of how densely markets can be penetrated? I just want to, you know, I guess have a sense of.
Speaker Change: You know, your, you know, level of risk acceptance in terms of, you know, hitting your U.S. store targets without overly encroaching on your existing current asset base. Thank you.
Russell J. Weiner: And maybe I'd start with the fact that I remember when we used to actually disclose what the headwinds of splits were. So the fact that we're not disclosing them anymore can give you a sense of how material they are. The great thing about the Domino's model, and us, you know, leaning into carryout, you know, about a decade ago, is that 80%, when you split a store, 80% of the carryout volume is incremental.
Speaker Change: Yeah, John , I'll take that. And maybe I'd start with the fact that I remember when we used to actually disclose what headwinds of splits were. So the fact that we're not disclosing them anymore can give you a sense of how material they are.
Speaker Change: The great thing about the Domino's model, and us, you know, leaning into carry out, you know, about a decade ago, is...
Speaker Change: 80% when you split a store, 80% of the carryout volume is incremental.
Russell J. Weiner: And so, you know, right away, when you're splitting a territory, you get all these customers, customers who don't want to drive past four pizza places on their way to a Domino's. And so the more Domino's we have, the more carryout business we drive, and you can see how hot carryout is. The number that Sandeep took you through what same store sales for carry out that has nothing to do with all the carry out sales were driving from the news. And then what happens when you split these stores? Not only does your care business get better.
Speaker Change: And so, you know, that right away, when you're splitting a territory, you're getting all these customers, customers, they don't want to drive past four pizza places.
Speaker Change: on their way to a Domino's. And so the more Domino's we have, the more carryout business we drive, and you can see how on fire carryout is. The number that...
Speaker Change: Sandeep took you through what same store sales for carryout that has nothing to do with all the carryout sales were driving from new stores
Speaker Change: And then what happens when you split these stores, not only does your care business get better.
Russell J. Weiner: But remember, I talked earlier about our delivery time being 10% better than it was two years ago. Sure, it's a lot of the programs that we're driving with our franchisees. But it's also when you split stores; you get closer to your customers, and when you have more consistent delivery, those customers come back more. So it really is a wonderful cycle when it's really going well. And actually, what I say is because you asked about international learning, one that DPE was one of the first folks to do in Australia. They got a 50 market share in Australia, and a lot of it was through, you know, penetration with new stores and obviously tightening their delivery areas, growing their carry out business. What they talked about that they saw in Japan was that they probably split a little too fast.
Speaker Change: But remember I talked earlier about our delivery times being 10% better than they were two years ago? Sure, it's a lot of the programs that we're driving with our franchisees, but it's also when you split stores you get closer to your customers.
Speaker Change: And when you have more consistent delivery, those customers come back more.
Speaker Change: So it really is a, it's a wonderful cycle when it's really going well.
Speaker Change: And actually, one, what I'd say is, is you'd ask about international learning.
Speaker Change: One that DPE was one of the first folks to do in Australia, you know, they got a 50 market share in Australia and a lot of it was through, you know, penetration with new stores and obviously tightening their delivery areas, growing their carry out business.
Sara Harkavy Senatore: But doing it strategically over time has been a winning formula. They've shown it, and I think that's been a huge driver of our market share. Thank you. And our next question comes from the line of Sara Senatore from Bank of America. Your question, please. Thank you.
Speaker Change: What they talked about that they saw in Japan was they probably split a little too fast. But doing it strategically over time has been a winning formula. They've shown it. And I think that's been a huge driver of our market share.
Speaker Change: Thank you. And our next question comes from the line of Sara Senatore from Bank of America. Your question, please.
Sandeep Reddy: I actually have just one clarification and then a question on new restaurant growth. So the clarification was just quickly on pricing versus cost inflation and whether franchisees are seeing something similar. Obviously, you're still on track for the franchisee profitability targets, but, you know, a pretty modest pricing increase that clearly didn't cover inflation for labor insurance. Is that kind of the dynamic that we should expect to see broadly going forward?
Sara Harkavy Senatore: Thank you. I have actually sort of one just clarification and then a question on the new restaurant growth. So if the clarification was just quickly on the pricing versus cost inflation and whether franchisees are seeing something similar. Obviously, you're still on track for the franchisee profitability targets, but you know, pretty modest price increase that clearly didn't cover inflation for labor insurance. Is that kind of the dynamic that we should expect to see broadly going forward or was there any anything kind of one time in this quarter that, you know, specifically perhaps around insurance, but
Sandeep Reddy: Or was there any kind of one-time special event in this quarter that, you know, specifically perhaps around insurance? But then the question on net restaurant growth comes up. You mentioned strength in China and India. Could you just maybe, in broad strokes, talk about what volumes look like in different parts of the world?
Sara Harkavy Senatore: Then the question on net restaurant growth is about...
Speaker Change: You mentioned, you know, strength in China and India.
Speaker Change: Could you just maybe in broad strokes talk about what volumes look like in different parts of the world?
Sandeep Reddy: So a closure in Australia presumably is a higher volume, or let's say a lack of openings in Australia, more of a hit to volumes for retail sales overall than perhaps openings in China and India. I mean, that would be my guess, but perhaps that's not accurate. Thanks. So, Sara, let me start with the clarification on pricing versus the cost of inflation. I think you're talking about the corporate stores particularly, and really, if you look at what happened at the corporate stores, and we had an insurance charge in the quarter that actually resulted in margins contracting, and if you actually strip out that insurance charge, margins were roughly flat, and profit dollars grew. And really speaking, when we look at our franchisee profitability, that's pretty much a dynamic. We're looking at profit dollar growth, and that's exactly what we're expecting to see.
Russell J. Weiner: And frankly, we expect to see that in corporate stores as well as as we actually go through the year. We continue to expect to see both margin improvement as well as profit dollar growth on the corporate stores. And then, specific to restaurant growth in China and India, and your comment on the size of the stores, the closures that we're talking about, essentially, are very low-volume stores. So, from that perspective, I think they're not necessarily comparable to the averages across all the different markets. And so, I think the drag is relatively small with the closures that we're talking about specifically in Japan and France.
Speaker Change: you know, a closure in Australia presumably is, you know, a higher volume or, let's say, lack of openings in Australia, more of a hit to volumes for retail sales overall than perhaps openings in China and India. I mean, that would be my guess, but perhaps that's not accurate. Thanks.
Speaker Change: So, so Sara, let me start with the...
Speaker Change: Thank you very much.
Speaker Change: And we had an insurance charge in the quarter that actually resulted in margins contracting. And if you actually strip out that insurance charge, margins were roughly flat and profit dollars grew.
Speaker Change: And really speaking, when we look at our franchisee profitability, that's pretty much a dynamic.
Speaker Change: We're looking at profit-dollar growth, and that's exactly what we're expecting to see, and frankly, we expect to see that in corporate stores as well, as we actually go through the year. We continue to expect to see both margin improvement, as well as profit-dollar growth on the corporate stores as well.
Speaker Change: And then I think, specific to restaurant growth in China and India, and your comment on the size of the stores, the closures that we're talking about, essentially, are very low-volume stores.
Speaker Change: So, from that perspective, I think they're not necessarily comparable to the averages across all the different markets. And so, I think the drag is relatively small with the closures that we're talking about specifically in Japan and France.
Russell J. Weiner: And the growth opportunities continue to be robust. And the Chinese stores have actually put out releases talking about their new store openings and the kind of record sales they're generating over there. And I'd add to that, Sara, for us.
Speaker Change: And the growth opportunities continue to be robust and the China stores, they've actually put out releases talking about their new store openings and the kind of record sales they're generating over there. So, very exciting to see the growth coming from China.
Russell J. Weiner: And I think really for the industry, when you think about the best way to cover cost inflation, assuming margins are, you know, in the area where they should be, the best way to do that is by driving order counts versus price. And so cost inflation for some folks may be a negative thing for us, given our scale, because we can drive more order counts. If we can get away with doing that without pricing and getting frequency, we're going to do that all day, and that's what's happening. And, and I look, I just want to give a nod to our insights.
Speaker Change: And I added that, Sara, for us.
Speaker Change: And I think really for the industry, when you think about the best way to cover cost inflation, assuming margins are, you know, in the area of where they should be.
Speaker Change: The best way to do that is by driving order count versus price. And so cost inflation, for some folks, may be a negative thing. For us, given our scale, because we can drive more order counts...
Speaker Change: If we can get away with doing that without pricing and getting frequency, we're going to do that all day, and that's what's happened. And I just want to give a nod to our Insights team.
Russell J. Weiner: Because, you know, one of the questions earlier was about pricing in this environment right now and headwinds with the customer. Well, through our research, we knew we figured out when it was time to take pride in our work, but we also figured out when it was time not to take pride in it.
Speaker Change: Because, you know, one of the questions earlier was about, you know, pricing in this environment right now and headwinds with the customer. Well, through our research, we knew, we figured out when it was time to take price, and we also figured out when it was time not to take price.
Russell J. Weiner: And all of those decisions are leading to the results you see now, and they will continue to drive what we decide to do moving forward. Now the best piece of it, too, is that the research, a lot of it is, you know, it's numbers. But then it gets translated to real life when you put it down in the stores.
Speaker Change: And all of those decisions are what's leading into the results you see now. And it will continue to drive what we decide to do moving forward.
Speaker Change: Now the best piece of it too is, you know, the research, a lot of it is, you know, it's numbers, but then it gets translated to real life when you put it down to the stores. And then what you do is you watch what consumers do and you watch what your franchisees do.
Russell J. Weiner: And then what you do is you watch what consumers do, and you watch what your franchisees do. And what's been great is, obviously, the order counts. So consumers are happy. But franchisees are sticking with the recommendations, not only obviously on their national offer but local offers and, and, and, and menu prices. And so this is something that I think is proprietary to us and has worked and will continue to work over time. Thank you.
Speaker Change: And what's been great is, obviously, the order counts, so consumers are happy. But franchisees are sticking with the recommendations, not only, obviously, on their national offer, but local offers and menu pricing.
Speaker Change: And so this is something that I think is proprietary for us and has worked and will continue to work over time.
Danilo Gargiulo: And our next question comes from the line of Danilo Gargiulo from Bernstein. Your question, please. I was wondering if you could give a little bit more color on what you think, at least in your view, what is causing the softmaxing unit opening by DPE, and more specifically, also, if you could share what is your level of confidence that international store openings and closure pressures are going to be limited only to DPE and that we're not going to see another potential reduction in the guidance later on with other master franchisees coming in I'll let DPE's release kind of speak to what they're thinking about those closures. So they talked about Japan being a little bit aggressive in openings.
Speaker Change: Thank you. And our next question comes from the line of Danilo Gargiulo from Bernstein. Your question please.
Danilo Gargiulo: Thank you.
Danilo Gargiulo: I was wondering if you can give a little bit more color on what you think, at least in your view, what is causing the softmaxing unit opening by DPE, and more specifically also, if you can share what is your level of confidence
Speaker Change: That international store openings and closure pressures is going to be limited only to DPE and that we're not going to see another potential reduction in the guidance later on with other master franchisees coming in software versus the original expectation. Thank you.
Russell J. Weiner: And now they're seeing kind of the result of that. What gives me confidence about the rest of the pieces of the algorithm is, you know, as an example, I said earlier, DBZ China, Dash, and Jubilant are going to be 40 to 50% of our openings, and they each increased their outlook. And so the beauty of being in over 90 countries around the world is, look, I'm not trying to look away from what clearly was a miss on one part of the business.
Speaker Change: I'll let DPE's release kind of speak to what they're thinking about those closures, so they talked about Japan being a little bit aggressive in openings and now they're seeing
Speaker Change: What gives me confidence about the rest of the pieces of the algorithm is, you know, as an example, I said earlier, DBZChina, Dash, and Jubilant.
Speaker Change: They're going to be 40 to 50 percent of our openings and they each increased their outlook.
Speaker Change: And so, the beauty of being in over 90 countries around the world is, look, I'm not trying to look away from what clearly was amiss in one part of the business.
Speaker Change: But a good business is able to kind of handle that and that's what the N90 plus market helps us do.
Russell J. Weiner: But a good business is able to kind of handle that. And that's what being in 90 plus markets helps us do. And all of these levers that end up leading to the 7% plus on the sales basis and the 8% plus on the profit basis really show how that is made up in times like this. Thank you. And our next question comes from the line of Peter Saleh from PTIG. Your question, please. Yeah, great.
Speaker Change: And all of these levers that end up leading to the 7% plus on the sales basis and the 8% plus on the profit basis really show how that is made up in times like this.
Speaker Change: Anything to add? No, that's all right. Okay.
Speaker Change: Thank you. And our next question.
Peter Mokhlis Saleh: comes from the line of Peter Saleh from BTIG. Your question, please. Yeah, great. Thanks for taking the question. I wanted to ask about the, you know, you guys mentioned positive order counts in both delivery and carryout in the U.S.
Peter Mokhlis Saleh: Thanks for taking the question. I wanted to ask about the, you know, you guys mentioned positive order counts for both delivery and carryout in the US. Can you just talk a little bit about whether these are new customers? Are these lapsed users?
Peter Mokhlis Saleh: Can you just talk a little bit about, are these new customers, are these lapsed users, and just any thoughts on that?
Russell J. Weiner: And just any thoughts on that, call it the lower-income consumer. Are you seeing, I know you said you were seeing growth across all income cohorts, but any thoughts on what you're seeing there? Is that accelerating? Is it stable?
Speaker Change #100: Call it lower income consumer. Are you seeing, I know you said you were seeing growth across all income cohorts, but any thoughts on what you're seeing there? Is that accelerating? Is it stable? I guess that's my first question. And just to follow up on that, on the
Sandeep Reddy: I guess that's my first question. And just to follow up on that, on the store closures from DPE, Sandeep, you said they had a very low volume. Is there any way to give us an order of magnitude of how low these stores are in terms of volumes, just so that we understand?
Sandeep Reddy: Store closures from DPE. Sandeep, you said they're very low volume. Is there any way to give us an order of magnitude of how low these stores are in terms of volumes, just so that we understand? Thank you very much.
Sandeep Reddy: Thank you very much. Yeah, I mean, maybe Sandeep, you can the other way to look at that is to talk about the profit impact. Yeah, no, I think so on this, let me start with the second part of the question, right, which is the store volumes and what's going to happen. Very low volume in relative terms to the rest of the fleet and rest of the market in all the stores that are closing in Japan and France.
Speaker Change #101: Yeah, maybe Sandeep, you can, the other way to look at that is just talk about the profit impact.
Sandeep Reddy: Yeah, I think, so on this, let me start with the second part of the question, right, which is the store volumes and what's going to happen.
Sandeep Reddy: So the impact is so material to the profit number. It's, you know, in a few million dollars, and on a forward basis for 2025 and will have a very limited impact even on 2024, considering we're only half way through the year. So, very small to answer your question.
Sandeep Reddy: Very low volume in relative terms to the rest of the fleet and rest of the market in all the stores that...
Sandeep Reddy: Closing in Japan and France.
Sandeep Reddy: So the impact is so immaterial to the profit number.
Sandeep Reddy: It's in a few million dollars, on a forward basis, for 2025, and will have a very limited impact even on 2024, considering we're only halfway through the year. So, very small, to answer your question from that piece.
Russell J. Weiner: Yeah, and Peter, just on the first question, you know, what I say about the order count, and I try to stress this by giving the specifics of delivery and carry out and every income segment, is that we've got some of the most balanced order counts I've ever seen. And I believe that's also true for not only in our history but also just in the industry right now, your specific question on the lower-income customer. Yeah, the order count there is positive as well.
Sandeep Reddy: Yeah, and Peter, just on the first question, you know, what I'd say about the order count, and I try to stress this by giving the specifics of delivery and carryout in every income segment,
Peter: is we've got some of the most balanced order count I've ever seen.
Speaker Change #103: And I believe that's also true for the not only in our history, but also just in the industry right now, your specific, you know, question on the lower income customer. Yeah, the the order count there is positive as well. And, and, and
Russell J. Weiner: And and, and Part of that was intentional, not only from our pricing, but as we put the loyalty program together. Remember, you used to have to have two things; you had to buy $10 worth of food to get any. Now it's $5, so that hurdles. You used to have to buy six times to get something free.
Speaker Change #103: Part of that was intent, not only from our pricing, but as we put the loyalty program together. Remember, you used to have to have two things.
Speaker Change #103: You had to buy $10 worth of food to get any points. Now it's $5, so that hurdle's a little bit easier.
Russell J. Weiner: Now you can buy them and get some free after two orders, which is great for the customer and actually great for a franchisee too because the margin on the 20 and 30 point items is much better on those orders than the six. So it's not like we just kind of fell into this; this was intentional in both the design of our pricing and the design of our loyalty program, and it's not going away. And the beautiful thing, Pete, is it's so balanced across all income cohorts, and I think it really reflects what Russell's talking about, and that consistency has been seen all through the first. Thank you. And our next question comes from the line of Chris O'Cull from Stifo. Your question, please. Yeah, good morning, guys.
Speaker Change #103: You used to have to buy six times to get something free, now you can get something free after two orders, which is great for the customer, actually great for a franchisee too, because the margin on the 20 and 30 point items is much better on those orders than the 60.
Speaker Change #103: So it's not like we just kind of fell into this, this was intent in both the design of our pricing and the design of our loyalty program, and it's not going away.
Pete: And the beautiful thing, Pete, is it's so balanced across all income cohorts, and I think it really reflects what Russell's talking about, and that consistency has been seen all through the first half of the year.
Speaker Change #106: Thank you. And our next question comes from the line of Chris O'Call from Stiefel. Your question, please.
Chris O'Cull: Russell, given the success of the New York style pizza, can you talk more about this innovation with intent strategy? And it's just part of that answer. Can you maybe touch on whether the innovation you expect to launch later this year will leverage that approach? Yeah, sure, Chris. Well, I'll tell you the one thing that did not sell New York style pizza was the guy in the spot, which for those of you who don't know, was me. Sandeep keeps telling me I have a face for radio.
Christopher Emilio Carril: Yeah, good morning, guys. Russell, just given the success of the New York style pizza, can you talk more about this innovation with intent strategy? And it's just part of that answer. Can you maybe touch on whether the innovation you expect to launch later this year will leverage that approach? Unknown Speaker
Russell J. Weiner: Yeah, sure, Chris. Well, I'll tell you the one thing that did not drive New York-style pizza was the guy in the spot, which for those of you who don't know, was me.
Russell J. Weiner: Sandeep keeps telling me I have a face for radio, so we'll see when it's time for your performance review how that works out. But yeah, so New York style piece of this idea of innovation with intent, if you look back the last 15, 16 years at Domino's, there are...
Russell J. Weiner: So we'll see when it's time for your performance review how that works out. But yeah, so New York style pizza, this idea of innovation with intent. If you look back on the last 15, 16 years at Domino's, there are... I can't think of more than two items that we've lost, that we've taken off the menu.
Speaker Change #107: I can't think of more than two products that we've launched that we've taken off the menu.
Russell J. Weiner: Launching a new product takes a lot of money and takes a lot of time, and so there needs to be a strategic role for it. Whether or not you are successful depends on whether or not the value zones are still there. So you think about, I'm not going to really give you any forward-looking on it to say, you know, we're going to continue to do two a year. New York style pizza, right? We talked about this is a customer that may not like our traditional crust as much, so there's a reason for doing it. If you think about what we did last year with pepperoni stuffed cheesy bread, okay, putting pepperoni in something is probably not the most innovative thing in the world, but guess what?
Speaker Change #107: Launching a new product takes a lot of money, takes a lot of time.
Speaker Change #107: And so there needs to be a strategic role in it. Whether or not you are successful is whether or not those items are still there.
Speaker Change #107: So, you think about, I'm not going to really give you any forward looking of it to say, you know, we're going to continue to do two a year.
Speaker Change #108: New York style pizza, right? We talked about this is a customer that may not like our traditional crust as much, so there's a reason for doing it.
Speaker Change #109: If you think about what we did last year with pepperoni stuffed cheesy bread, okay, putting pepperoni in something is probably not the most innovative thing in the world. But guess what? It reminded people that we had stuffed cheesy bread. And when you have all of these platforms, and remember Chris, 40% of what we sell is not pizza.
Russell J. Weiner: It reminded people that we have stuffed cheesy bread. And when you have all of these platforms, and remember, Chris, 40% of what we sell is not pizza. You got to figure out a way to continue to talk about pizza but continue to remind people that you have these platforms. And so, you know, maybe those are two good examples of intent.
Christopher Emilio Carril: You've got to figure out a way to continue to talk about pizza, but continue to remind people that you have these platforms.
Russell J. Weiner: One is going after a customer that probably doesn't frequent Domino's, and the other is reminding people of a platform where when they add to their order, it increases the ticket and is more profitable for our franchise. Thank you. And our next question comes from the line of Brian Harbour from Morgan Stanley. Your question, please. Yeah, thanks.
Christopher Emilio Carril: And so, you know, maybe those are two...
Speaker Change #110: Thank you. And our next question comes from the line of Brian Harbour from Morgan Stanley . Your question please.
Brian James Harbour: Good morning, guys. If I could just follow up on some of the comments about store margins. So if you kind of set aside that insurance impact, I mean, is this mostly just about there being still pretty significant wage inflation? Do you think that's kind of the case through the balance of this year?
Brian James Harbour: Yeah, thanks. Good morning, guys. If I could just follow up on some of the comments about
Sandeep Reddy: Obviously, you did have, you know, order count growth, right? But it sounds like that's kind of being offset on the labor side. And I don't know if maybe there's, you know, any sort of product mix dynamics that have also affected that.
Brian James Harbour: Store margins. So if you kind of set aside that insurance impact, I mean, is this mostly just about there being still pretty significant wage inflation? Do you think that's kind of the case through the balance of this year? Obviously, you did have, you know, order count growth, right? But it sounds like that's kind of being offset on the labor side.
Speaker Change #112: And I don't know if maybe there's, you know, any sort of product mix dynamics that have also affected that. Could you just talk more about, you know, the store margin dynamics?
Sandeep Reddy: Could you just talk more about, you know, the store margin dynamics? Yeah, so, Brian, I think the thing with these company stores is actually it's a much smaller data set, right? Because we only have about 60 MA's in which we're operating.
Speaker Change #113: Yeah, so Brian , I think the thing with these company stores is it's actually a much smaller data set, right, because we've only got about 60 MAs in which we're operating.
Speaker Change #114: And, yes, there was some wage pressure that we were actually dealing with as we went through the first half, but we're getting closer to lapping some of the wage pressures that we took, and overall...
Speaker Change #115: When you look at the economics of the stores, they're actually, on a first-half basis, still pretty good, and it definitely exceeds the insurance adjustment.
Speaker Change #115: We're still expanding and growing. We expect that to continue to happen. That's why I said for the full year on the company stores, I still expect our margins to be better and our profit dollars to grow.
Speaker Change #115: And I think being, what I want to emphasize is we shouldn't view company stores as an analog to what's happening on the franchisee stores because the data set is so limited in relative terms.
Russell J. Weiner: And, and yes, there was some wage pressure that we were actually dealing with as we went through the first time, but we were getting closer to lapping some of those wage pressures that we took. And overall, when you look at the economics of the stores, they were actually, on a first half basis, still pretty good. And it definitely, [inaudible] On the franchisee stores, we're seeing very, very balanced profit growth across the business.
Speaker Change #115: On the franchisee stores, we're seeing very, very balanced profit growth across the business, and that's what gives us confidence that the $170,000 or more is definitely on track.
Russell J. Weiner: And that's what gives us confidence that the $170,000 or more is definitely on track. Yeah, I'll just maybe build on that, you know, the question on the lap just reminds me of an earlier question we had about Q4 and emergency pizza and how we're going to handle that potential headwind. And I guess what I'd say there is, we are in the business of creating headwinds. I love the questions about headwinds because that means we did something really successful that folks are wondering, oh, how are we going to overlap?
Speaker Change #116: Yeah, I'll just maybe build on that, you know, the question on the lap just reminds me of an earlier question we had about Q4 and emergency pizza and how we're going to lap that potential headwind. And I guess what I'd say there is we are in the business of creating headwinds.
Russell J. Weiner: Well, we're in the business of creating headwinds, and we're in the business of beating those headwinds. And so I'm not concerned about that. And I know what the team has going on, and they're up for the challenge. And if you think about emergency pizza. During this time now, when you are seeing a lot of price points out there from folks, I think, you know, who has what price point is going to be, as I always talk about, CS Amos. How are you going to know when an ad is over? You know, who owns this particular price point? Everyone in the country knows who owns emergency pizza.
Speaker Change #116: I love the questions on headwinds because that means we did something really successful that folks are wondering, oh, how are we going to overlap? Well, we're in the business of creating headwinds, and we're in the business of beating those headwinds.
Speaker Change #116: And so I'm not concerned about that and I know what the team has going and they're up for the challenge.
Speaker Change #117: And if you think about emergency pizza.
Speaker Change #117: During this time now, where you are seeing a lot of price out there from folks,
Speaker Change #118: I think, you know, who has what price point is going to be, as I always talk about a CS Amos, how are you going to know when an ad is over, you know, who owned this particular price point?
Russell J. Weiner: And so we have things like that carry out tips; you tip, we tip. That's a renowned value. And so there are, As you see, more and more discounts for customers as I think different restaurants are adjusting to pricing. I believe there's going to be a lot of noise in that, and what our team does really breaks through that noise.
Speaker Change #119: Everyone in the country knows who owns emergency pizza, and so we have things like that, Carry Out Tips, U-Tip, We-Tip, that's renowned value, and so there are
Speaker Change #119: As you see, more and more discounts to customers as I think different restaurants are adjusting to pricing.
Speaker Change #119: I believe there's going to be a lot of noise in that, and what our team does really breaks through that noise.
Todd Morrison Brooks: Thank you. And our next question comes from the line of Todd Brooks from the Benchmark Company. Hey, good morning.
Speaker Change #119: Thank you. And our next question comes from the line of Todd Brooks from the Benchmark Company.
Sandeep Reddy: Thanks for taking my question. Just a quick follow-up on loyalty. Sandeep, I think when you talked about loyalty last quarter, you talked about the 20 and 40 point reward tiers being the majority of redemptions. I wanted to see if that trend is continuing going forward and, With enough time passing, do you have a sense that somebody that redeems at a lower point level tends to continue to do so? So it's almost a faster frequency flywheel coming from loyalty if those customers stick at those lower redemption tiers.
Todd Morrison Brooks: Hey, good morning. Thanks for taking my question. Just a quick follow up on loyalty.
Sandeep Reddy: Sandeep, I think when you talked about royalty last quarter that you talked about the 20 and 40.
Todd Morrison Brooks: point reward tiers being the majority of redemptions. Wanted to see if that trend is continuing to go going forward and
Todd Morrison Brooks: With enough time passing, do you have a sense that somebody that redeems at a lower point level tends to continue to do so? So it's almost a faster frequency flywheel coming from loyalty if those customers stick at those lower redemption tiers, thank you.
Sandeep Reddy: Thank you. So, Todd, you asked the question and answered it yourself, and really, it's exactly that. We have seen very consistent trends in terms of the redemption of the 20 and 40 point levels, and it is driving that frequency flywheel as we go along because they're continuing to transact.
Todd Morrison Brooks: So, Todd, you asked the question and answered it yourself, and really, it's exactly that.
Todd Morrison Brooks: We have seen very consistent trends in terms of the redemption of the 20 and 40 point levels and it is driving that frequency flywheel as we go along because they're continuing to transact and redeem and that's what we're very confident on continuing as we move forward.
Sandeep Reddy: And that's what we're very confident of continuing as we move forward into a multi-year flywheel. Yeah, and you know, back to the question before, Todd, that reminds me of innovation with intent. Innovation with intent is not just new products. It's a loyalty program and how you put your renowned value together. So with emergency pizza, if you recall, you buy a pizza, and you can get a free one in a month. Well, you do that, and all of a sudden, you're part of our loyalty program.
Speaker Change #121: Yeah, and you know, back to the question before, Todd, that reminds me of the innovation with intent. Innovation with intent is not just new products.
Speaker Change #122: It's a loyalty program and how you put your renowned value together. So with Emergency Pizza, if you recall, you buy a pizza, you can get a free one in a month. Well, you do that, all of a sudden, you're part of our loyalty program. You're at 20 points, you're getting a free item.
Sandeep Reddy: If you're at 20 points, you're getting a free item. With our tipping program, either carry out or delivery one, if you buy one, you're part of the program. You then use your tip, you've got a second item if you're part of the loyalty program and you're redeeming it.
Speaker Change #122: With our tipping program, either carry out or delivery one, if you buy one, you're part of the program. You then use your tip, you've got a second item, if you're part of the loyalty program, and you're redeeming.
Russell J. Weiner: The most important thing about our new loyalty program is getting people to understand how easy it is to earn. And the programs that we're putting out there aren't just driving sales; they're driving that clarity for folks about, wow, I can get stuff really quick. Thank you, and our next question comes from the line for Christine Cho from Goldman Sachs. Your question, please. Hi, thank you.
Speaker Change #122: The most important thing about our new loyalty program is getting people to understand how easy it is.
Speaker Change #122: to earn.
Speaker Change #122: And the programs that we're putting out there aren't just driving sales, they're driving that clarity for folks about, wow, I can get stuff really quick.
Hyun Jin Cho: So I know you just had the worldwide rally in May. So, really curious to hear some of your key takeaways from the event. What were any surprises? What were the areas that your franchisees around the world are most excited about, or most worried about any common strategic priorities that have come up there? It will be great.
Russell J. Weiner: Thank you. Yeah, Christine, this was a fantastic rally. And it's not just me saying it. Here's I'll give you some some numbers on it.
Russell J. Weiner: You know, we do quantitative studies on everything here at Domino's. So this rally was the highest rally we've ever had as far as people go, but the scores of attendees, we've never had a higher one. And this one blew my mind. I'll get you that later if I'm sharing something I shouldn't.
Russell J. Weiner: But one of the things we ask people is, did what was the key message take away? And the results there were 98% took away the key message. We've never had numbers anywhere like that.
Russell J. Weiner: And the cool thing was people were leaving the rally. You know, a lot of times you do these rallies and whatever they're called, you know, like the bumper sticker, we're going to send out earlier, it really is more, what does the t shirt look like? Or what do people shout? Hungry for more was more than that. Folks came away knowing what jobs they wanted. And so the really cool part for me was, for example, the US franchisees leaving and saying, I got it, I'm responsible for the M and the O, making sure the food we make is delicious, and we deliver it the right way. We had international franchisees saying, ah, this idea of renowned value is really, really interesting. And what happened?
Russell J. Weiner: We went back, and you know, you've seen changes in marketing and in a lot of our international markets because of Hungry for More. And so, I just, I believe it not only talks about the strength of our system, it's nice to have profitable franchisees all in one place, they're all pretty happy. But when they come away talking about the future, it's what makes us really.
And we deliver it the right way, we had international franchisees, saying this idea of renowned value is really really interesting and what happened we went back and you've seen changes in the marketing and a lot of our international markets.
Speaker Change #122: Because of hungry for more and so.
Speaker Change #126: I just I believe it not only talks about the strength of our system, it's nice to have.
Speaker Change #126: Profitable franchisees all in one place they are all pretty happy, but when they come away talking about the future.
Speaker Change #122: Is what makes us really excited.
Russell J. Weiner: Thank you, Christine. 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 with 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.
Christine: Thank you Christine.
Speaker Change #124: Last question of the call I want to thank you all for joining our call today and we look forward to speaking with you all against it you may now disconnect.
Speaker Change #125: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Christine: Yes.