MORE sales, MORE margins, and MORE earnings for Domino's shareholders

MORE stands for Faster product innovation, Better operations, Smarter marketing, and Faster growth. After aimlessly driving to nowhere, Domino’s is decisively moving ahead with its MORE strategy.

In January, I wrote why Domino’s was likely to regain its business momentum LINK and later wrote an update on 4Q23 earnings LINK.

Accelerating Sales.

Domestic sales are piping hot, with same-store sales (SSS) hitting a scorching 5.6%, the fastest growth in over 2 years! This puts the brakes on any talk of a sales slump.

Here's the breakdown: both company-owned and franchised stores are raking in the dough. Company stores SSS grew 8.5%, while franchised locations enjoyed a solid 5.5% bump.

Delivery SSS rose 2.9%. But carryout isn't feeling left out, growing a whopping 9%!

Lastly, transaction growth is through the roof! Domino's is giving customers what they crave at the right price point.

Domino's might have raised eyebrows with their price hike in 2022 (increased Mix & Match Price from $5.99 to $6.99), but in 2023 they flipped the script! They held the line on prices while everyone else seemed to be jacking them up. Today, Domino’s is offering some of the best value in restaurants.

However, there are more levers to growth at Domino’s.

The New Loyalty program which dramatically reduced the threshold for points redemption has increased the value proposition even more. Consumers have recognized this value offer and are preferring Carry out over Delivery. Since promotions are tied to loyalty, enrollment in loyalty is growing. Hear from CEO Russell Weiner himself:

Domino's teamed up with Uber Eats to grab a bigger slice of the pizza delivery pie! They're targeting $1 billion in extra sales over the next three years, with a third of that coming in just year one. Talk about a fast-food fast track!

Here's the thing: while Uber sales are still a bit on the appetizer side (around 1.4% of total sales), they're growing steadily. This slow and steady approach is great news for long-term investors.

Why? Because it suggests Domino's is winning on more than just Uber. Their awesome ads, loyalty program, and fast delivery are bringing in the dough all by themselves. As management learns and adapts its pricing strategy on Uber, sales should increase. As the benefit from Uber builds, a similar 5% SSS increase for the remainder of the year and into 2025 is highly attainable.

International Sales to improve in 2H.

Here is a peek at Domino's international scene. Sales were only slightly better than flat this quarter, but more and more franchises overseas are adopting the "MORE playbook". Places like Australia and Mexico are already reaping the rewards, and Domino's expects international sales to jump 3% in the latter half of the year. This could lead to a faster expansion of Domino's worldwide store base.

Higher Margins to go along with accelerating sales.

But wait, there's More! Restaurant margins are on the rise, even with all those loyalty program redemptions. Margins grew 60 bps to 17.5%.

Earnings per share are up a strong 22% year-over-year!

Franchisee Profitability.

Happy franchisees with growing profits are more likely to open new stores, which means a higher multiple for the stock in the long run.

Domino’s is indeed rolling again. New initiatives are gaining momentum and the Uber rollout is in its early stages with significant benefits yet to come.