Domino’s Pizza(DPZ) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported diluted EPS of $2.19, a 19% increase over the prior year quarter adjusted EPS of $1.84 [7][18] - Total revenues for Q2 increased by $32.2 million or 4.1% from the prior year, driven by higher U.S. franchise retail sales and international royalty revenues [12][21] - Net income rose by $15 million or 19.3% compared to the prior year quarter [17] Business Line Data and Key Metrics Changes - U.S. same-store sales grew by 3%, while international same-store sales increased by 2.4% [8][9] - The franchise business in the U.S. saw a 3.1% increase, while company-owned stores experienced a 2.1% increase [9] - The company opened 200 net new stores globally in Q2, with 42 in the U.S. and 158 internationally [10][11] Market Data and Key Metrics Changes - Global retail sales grew by 5.1%, or 8.4% when excluding foreign exchange impacts [8] - International retail sales contributed to increased royalty revenues, although foreign currency exchange negatively impacted these revenues by $3 million [12][13] Company Strategy and Development Direction - The company continues to focus on its fortressing strategy to enhance market presence and profitability [28][31] - Investment in technology, including GPS tracking and autonomous delivery testing, is aimed at improving service and operational efficiency [34][35][100][102] - The company remains committed to maintaining strong unit economics and expanding its market share globally [38][39][94] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing competitive pressures from third-party delivery aggregators and the need to adapt to these challenges [27][66] - The company maintains its three to five-year outlook for same-store sales growth of 3% to 6%, despite current pressures [67] - Management expressed confidence in the strength of the international business and its ability to contribute to long-term growth [41][110] Other Important Information - The effective tax rate for the quarter was reported at 12.9%, down 2.2 percentage points from the prior year [17] - The company repurchased $3.3 million worth of shares in Q2, bringing the year-to-date total to $11.5 million [22] Q&A Session Summary Question: Opportunities to drive same-store sales - Management sees opportunities in both attracting new customers and increasing sales from existing customers through loyalty programs [44] Question: Changes in same-store sales trajectory - No material differences in pressures on same-store sales were noted, with ongoing challenges from third-party delivery aggregators [48] Question: Menu or value messaging changes - The company remains focused on value offerings and is continuously testing new menu items to drive long-term profitability [55][56] Question: Impact of third-party aggregators - Management believes the current discounting practices by third-party aggregators are unsustainable in the long term [66][67] Question: Store-level margin performance - The New York sale positively impacted operating margins, although labor pressures continue to affect overall profitability [84][85] Question: International unit growth - Strong unit growth was reported across all regions, particularly in BRIC markets, demonstrating robust unit economics [91][94] Question: Competition for delivery drivers - The company is facing increased competition for delivery drivers and is exploring alternative delivery methods to mitigate this challenge [97][100]