Domino's Pizza, Inc. (NYSE:DPZ) Q3 2019 Earnings Conference Call - Final Transcript

Oct 08, 2019 • 10:00 am ET


Domino's Pizza, Inc. (NYSE:DPZ) Q3 2019 Earnings Conference Call - Final Transcript


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Richard E. Allison

year time horizon for our outlook ranges for global retail sales growth, comparable unit sales in the US, comparable unit sales in our international business and also global unit growth.

I want to be very clear, this is not a reactive decision, but a proactive one to make our guidance more meaningful and more relevant to our investors in light of the current competitive landscape.

With all that said, our updated two to three year outlook is the following. 7% to 10% retail sales growth to be driven by 2% to 5% US comps, 1% to 4% international comps and 6% to 8% unit growth.

Let me talk a bit about each of those in turn. The international comp, our updated international comp reflects longer-than-expected weakness in some of our markets, recognizing that we've fallen below the previous outlook now for four consecutive quarters. And while some of this weakness is driven by the ongoing competitive pressures, I want to be clear that there are many opportunities for improvement that we and our master franchisees can influence. We are working alongside them every day through our centers of excellence, but these efforts are going to take some time to unfold.

When we look at the US comp, the updated range for our US comp reflects two things. First, the continued pressure from competitors, who are pricing delivery below the cost to serve. And second, the comparable sales drag as we plan to further ramp up our fortressing program. And I want to talk about that for a few minutes.

You might ask, why do we intend to get even more aggressive in building new stores? Well, the answer here is twofold. First, these fortress store openings continue to be a compelling economic opportunity. That's both for us and for our franchisees. Second, we've got a unique opportunity right now to solidify market share gains for the long term as our competitors retreat, and as these third-parties fundamentally alter the economics of many players in the restaurant industry. We believe that a significant shakeout is coming to the industry and there has never been a better time for Domino's to fortress.

Our US system is financially strong. We've got terrific four-wall economics and very, very healthy franchisees, who will generate approximately $1 million each in average EBITDA this year. We believe that our franchisees are aligned with the strategies, and they continue to invest in stores and invest in their people. I am as always grateful for their partnership.

So in closing, we're playing the long game at Domino's for our investors, and most importantly, for our franchisees. We firmly believe that now is the time to go on offence and to take advantage of our continuing strength to drive profitable growth, to expand our market share gap to the competition, and to further solidify Domino's as the dominant pizza brand.

So with that said, we are happy to take your questions.