Domino's Pizza (DPZ, Financial) saw a modest increase of 2% in stock value after reporting a Q3 EPS beat. Revenue rose by 5.1% year-over-year to $1.08 billion, aligning closely with expectations, though slightly soft. U.S. comparable sales were decent, and the new partnership with UberEats contributed 2.7% of total Q3 sales. However, the company expressed caution regarding its lower-income customer base and again lowered its 2024 guidance for global net store growth.
- U.S. comparable sales grew by 3.0%, slightly below Q2's 4.8%, but in line with guidance of "+3% or more" for Q3 and Q4. The Q3 sales were expected to be slightly below Q2 due to one fewer boost week, partially offset by an increase in UberEats sales. International comparable sales increased by 0.8% in constant currency.
- Domino's acknowledged a challenging environment in Q3 but was pleased with sales and order count growth, marking the fourth consecutive quarter of positive order counts. Carryout sales grew by 5.4%, with high single-digit growth in California. However, delivery sales saw some softness among lower-income customers.
- In late September, Domino's launched its new Mac & Cheese menu items, available in 5-Cheese and spicy buffalo, with optional add-ons like bacon bits. Alongside last year's pepperoni stuffed cheesy bread, these offerings aim to boost non-pizza sales. The return of the popular "Emergency Pizza" promotion next week is expected to drive Q4 traffic.
- International retail sales increased by 6.5% year-to-date, aligning with the global pizza category but falling short of expectations. Macroeconomic pressures and geopolitical issues are impacting international sales. Domino's plans for a 1-2% comp growth in 2024 and 2025, with a return to normalized levels expected in 2026.
- Domino's lowered its FY24 global net store growth forecast from 825-925 to 800-850, mainly due to challenges faced by international operations and Domino's Pizza Enterprises (DPE), a master franchisee, in both openings and closures.
Overall, Domino's Q3 report presents a mixed picture. While comparable sales held up well against macroeconomic pressures and cost management led to a significant EPS upside, challenges persist. The UberEats partnership and the return of the Emergency Pizza promotion are positives, but softness among lower-income customers and reduced international growth guidance are concerning.
