Domino’s Pizza (DPZ) FY Conference Transcript

Summary of Domino's Pizza (DPZ) FY Conference - June 14, 2023 Company Overview - Domino's Pizza is the largest pizza company globally, operating over 20,000 stores in more than 90 markets [1] Core Industry Insights - The U.S. consumer market faced challenges in 2022, with declines in real disposable income impacting the delivery segment. However, there are signs of recovery in 2023, with growing disposable incomes due to decreasing inflation and stable job and wage growth [4][5] - The company aims to focus on strategic initiatives rather than macroeconomic conditions to drive market share in the Quick Service Restaurant (QSR) pizza segment [5] Strategic Initiatives - An upgraded loyalty program is set to launch in fall 2023, targeting the existing customer base of 77 million, with 30 million active users. This program aims to enhance customer engagement and transaction frequency [6][7] - The e-commerce platform is also being upgraded to maintain a competitive edge, with current digital sales penetration at 80% [8][35] - The company emphasizes the importance of value in its offerings, with a focus on maintaining competitive pricing relative to the QSR sector [10][12] Delivery and Carryout Business - The delivery business has faced pressure on same-store sales, but the company is focused on improving value and service to capture growth when macro headwinds recede [11][12] - Carryout orders now account for 50% of U.S. orders, and the company believes this segment presents a separate growth opportunity with limited cannibalization from delivery [20][21] - Customer data indicates that less than 20% of customers switch between delivery and carryout, suggesting distinct customer profiles for each service [21][22] Service Improvement Initiatives - The "Summer of Service" initiative aims to enhance service levels through comprehensive training for franchisees, addressing past staffing challenges and operational inefficiencies [26][30] Digital Transformation - The company is revamping its loyalty program and e-commerce platform to drive sales growth, with expectations of improved conversion rates and customer engagement [32][34] Unit Growth and Economics - Franchisees are currently generating strong EBITDA per unit of approximately $140,000, with three-year paybacks, indicating strong incentives for unit growth [38] - The company projects annual unit growth of 5% to 7% over the next two to three years, supported by solid unit economics and improved visibility in the store opening pipeline [41][42] International Growth Opportunities - Significant growth potential exists in international markets, particularly in China and India, where the demand for the Domino's brand is high [52][53] - The company is optimistic about growth in Europe and the Americas, with strong performance reported in the U.K., Spain, Mexico, and Canada [56][59] Profitability Focus - The CFO emphasizes a focus on EBIT margins and profitability through pricing architecture, supply chain optimization, and managing G&A expenses [61][66] - The company anticipates returning to pre-pandemic operating margins by the end of the year, driven by improved profitability metrics [66] Capital Structure and Future Outlook - The company plans to manage its debt structure carefully in light of rising interest rates, with a focus on returning capital to shareholders through dividends and share repurchases [68][70] - An Investor Day is scheduled for Q4 2023, aimed at showcasing strategic initiatives and their expected financial outcomes [71][72]