Domino's Pizza (DPZ, Financial) saw its stock plummet by 12% even after announcing a significant Q2 EPS beat. Revenue increased by 7.1% year-over-year to $1.10 billion, aligning with analyst expectations. Despite robust US comps, the company revised its long-term guidance for annual global net store growth downward.
- US comps showed improvement, with Q2 same-store comps at +4.8%, slightly down from Q1's +5.6% but better than previous quarters. International comps (excluding FX) were +2.1%, up from Q1's +0.9%.
- US comps were driven by positive order counts in both delivery and carryout businesses across all income cohorts. Carryout comps rose by +7.9%, while delivery comps increased by +2.7%, mainly due to transaction growth. Higher carryout mix, which has a lower ticket than delivery, partially offset these gains.
- DPZ benefited from a 1.5% price increase, including high single digits in California. Sales from the Uber partnership grew to 1.9% for Q2, meeting expectations. The Emergency pizza promotion also boosted comps in Q4 and Q1, although it has now ended. DPZ recently launched marketing for its UberEats partnership, positively impacting comps.
- DPZ introduced a New York-style pizza in Q2, featuring a thinner, more foldable crust. This new offering aims to attract customers with different preferences than traditional Domino's pizza.
- Why is the stock lower? Despite expecting 175+ net new stores annually in the US for 2024-28, DPZ lowered its international new store outlook. The company now expects to fall 175-275 stores short of its 2024 goal of 925+ net international stores, mainly due to challenges faced by its master franchisee, Domino's Pizza Enterprises (DPE). As a result, DPZ is temporarily suspending its guidance of 1,100+ global net stores.
Operationally, Q2 results were solid, with significant EPS upside and strong US comps despite the end of a key promotion. Both carryout and delivery showed comp growth, and the UberEats partnership appears promising. However, investors are concerned about the reduced international store outlook, making it a critical area to monitor in upcoming quarters.
