Although Domino’s Pizza reported 4.8% same-store sales growth for the second quarter ended June 16, the company’s stock took a 14% nosedive after failing to meet investors’ expectations and suspending its store growth guidance due to challenges in international markets.
As U.S. sales steadily increased for Domino’s this quarter, thanks to improved cross-channel transaction growth, the Ann Arbor, Mich.-based chain simultaneously contended with challenges overseas, especially with Domino’s Pizza Enterprises — the company’s master franchise in more than 10 countries — which closed stores and is uncertain on openings at this time.
“I want to reiterate that our U.S. pipeline is strong, and it continues to grow,” Domino’s CEO Russell Weiner said during Thursday’s quarterly earnings call. “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 faced by Domino's Pizza Enterprises.”
Despite challenges in international markets, Domino’s Pizza continues to gain traction with customers that it had lost for several quarters as it struggled to keep up with consumer demand before partnering with Uber Eats. Now Uber orders account for 1.9% of the company’s sales mix, and Domino’s said the company is in line to exit 2024 with 3% Uber sales mix. Domino’s held two boost weeks during the second quarter, which also helped to increase transactions. Carryout is still the strongest channel for the pizza chain, and accounted for 7.9% same-store sales, while delivery was at 2.7%. The U.S. same-store sales were also boosted by 1.5% pricing increase during the quarter.
Overall, Domino’s new strategy seems to be focused on both loyalty and everyday value, as the company continues to emphasize it’s “Hungry for More” strategy. After launching a refreshed loyalty program last September, the company is already seeing a difference in returning guests and customers joining the program. Weiner said during Thursday’s earnings call that for the carryout business, orders with loyalty redemption are twice as high now as they were in the first half of 2023.
“As Americans continue to look for value, Domino's is providing renowned value and doing it profitably for our franchisees,” Weiner said. “It's not just about having the lowest price in the market. It's about providing value that's innovative and memorable. For now, value breaks through the sea of sameness discounts you see in the marketplace. Domino's Rewards is an example of that renowned value. It continues to perform well and was the key driver of our strong US comp performance in Q2.”
Deriving loyalty through everyday value and consistency — as opposed to the value menus, discounts, and crowded LTO calendars that have been the go-to strategy for other quick-service chains — is a key differentiator for Domino’s. Weiner emphasized that the company is not keen on LTOs and that when the brand does launch new menu items (which might not be as often as its competitors), they will not just be gone in a few months.
“It’s called innovation with intent,” Weiner said. “When we launch a new product, it has a specific role and is 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. 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.”
For the second quarter of 2024 ended June 16, Domino’s revenue increased $73.1 million, or 7.1% in the second quarter of 2023, primarily driven by higher supply chain, U.S. franchise advertising and U.S. franchise royalties and fees revenues. Net income increased $32.6 million, or 29.8%, in the second quarter of 2024 as compared to the second quarter of 2023. Domino’s opened net 175 new stores in the second quarter for a total store count of 20,930 restaurants globally.
Contact Joanna Fantozzi at [email protected]
