Release Date: February 24, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Domino's Pizza Enterprises Ltd (DMZPY) has a well-recognized and valued brand with strong franchisee networks, providing a solid foundation for growth.
• The company has taken decisive actions to improve profitability, including closing unprofitable stores and refocusing spending on IT, marketing, ingredients, and packaging.
• Domino's Pizza Enterprises Ltd (DMZPY) has a significant market presence in large pizza consumption markets like Germany, with opportunities for further expansion.
• The company is working on simplifying operations and improving unit economics to boost margins and franchisee profitability.
• Domino's Pizza Enterprises Ltd (DMZPY) has a strong focus on product development and customer value, aiming to deliver high-quality food at competitive prices.

Negative Points

• Network sales were 2.9% lower due to lower same-store sales, currency translation, and store closures.
• The company faces challenges in markets like France and Japan, which require individual turnaround strategies.
• Domino's Pizza Enterprises Ltd (DMZPY) is dealing with cost-of-living pressures affecting consumer spending globally.
• There is a need for improved execution and focus on closing the gap between top-performing and underperforming stores.
• The company is experiencing short-term challenges post-COVID, with complexity in operations due to the addition of new markets.

Q & A Highlights

• Warning! GuruFocus has detected 8 Warning Signs with DMZPY.

Q: What are the key strategies Domino's is implementing to drive the turnaround and improve productivity? A: Mark, the CEO, emphasized going back to basics and putting the consumer at the center. The focus is on driving efficiency while enhancing the consumer experience. Key areas for improvement include procurement, IT, and marketing efficiency. The company is also working closely with supplier partners to enhance consumer experience and make efficiency trade-offs. (CEO)

Q: How is Domino's addressing franchisee profitability, and what are the expectations for improvement? A: The CFO, Richard, noted that franchisee profitability has shown some momentum year-on-year, but there is a need for significant improvement. The company is focusing on improving unit economics and enabling franchise partners to build wealth and reinvest in their businesses. The goal is to achieve a 10% to 12% EBITDA margin for franchisees. (CFO)

Q: What are the challenges and strategies for growth in the French and Japanese markets? A: Mark highlighted that in France, the focus is on improving product perception and aligning with franchisees for consistent execution. In Japan, the strategy includes resizing the network and improving pricing and promotional strategies. Both markets require a focus on growth and leveraging existing opportunities. (CEO)

Q: How is Domino's planning to manage cost savings and reinvestment for growth? A: The company is targeting significant cost savings through procurement efficiencies and IT and marketing spend optimization. These savings will be reinvested to drive growth and improve franchisee profitability. The focus is on sustainable growth rather than short-term gains. (CEO)

Q: What is the outlook for store openings and closures, particularly in Japan? A: Domino's plans to close unprofitable stores, particularly in Japan, to secure a foundation for future growth. While there will be fewer new store openings in the near term, the company sees significant opportunities for growth in markets like Germany. The focus is on strategic growth and optimizing the store network. (CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.