Domino's Pizza Inc ($DPZ) Q4 2025 Earnings Call

Welcome to the Q4 full-year 2025 Domino's Pizza earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Greg Lemenchick, Vice President of Investor Relations and Sustainability. Please go ahead.

Good morning, everyone. Thank you for joining us today for our fourth quarter and year-end conference call. Today's call will begin with our Chief Executive Officer, Russell Weiner, followed by our Chief Financial Officer, Sandeep Reddy. The call will conclude with a Q&A session. The forward-looking statements in this morning's earnings release and 10-K, both of which are available on our IR website, also apply to our comments on the call today. Actual results or trends could differ materially from our forecast. For more information, please refer to the risk factors discussed in our filings with the SEC. In addition, please refer to the 8-K earnings release to find disclosures and reconciliations of non-GAAP financial measures that may be referenced on today's call. This morning's conference call is being webcast and is also being recorded for replay via our website. We want to do our best this morning to accommodate as many of your questions as time permits. As such, we encourage you to ask one question only. With that, I'd like to turn the call over to Russell.

Thank you and good morning, everyone. We are very proud of our 2025 results as we drove profit growth that was in line with our expectations despite the challenging macroenvironment. Income from operations increased 7.3% in Q4 excluding the impact of foreign currency. This increase was primarily due to high US franchise royalties and fees and gross margin dollar growth within supply chain. This was partially offset by a decrease in US company-owned store margins that were meaningfully impacted by outsized insurance costs. For fiscal 2025, our income from operations increased 8.1% excluding a 0.6 million negative impact of foreign currency and $4 million in refranchising gains. Excluding the impact of foreign currency, global retail sales grew 4.9% in the fourth quarter and 5.4% for the year, both of which were due to positive US and international comps and global net store growth. Within the quarter, retail sales grew by 5.5% in the US driven by same-store sales and net store growth, which was in line with our expectations. Same-store sales were up 3.7% for the quarter on the strength of our Best Deal Ever promotion, the launch of our new specialty pizza, and to a smaller extent aggregators, all of which contributed to positive transaction counts.

We continue to manage our aggregator business with discipline with the aim of ensuring that we are maximizing incremental sales and profits for Domino's and our franchisees. Average ticket benefited from stuffed crust, which carries a higher price point, which was partially offset by a slight decline in our mix due to a higher carryout business that has a lower ticket than delivery. Pricing was flat in the quarter. Our carryout comps were up 6.5% and delivery was positive 1.6% due to the previously noted initiatives. For the year, our same-store sales in the US grew 3%, which was primarily driven by our renowned value promotions, inclusive of Best Deal Ever, as well as our successful launch of Parmesan Stuffed Crust Pizza. We also paced well ahead of the QSR pizza category, which grew in line with its historical range, resulting in continued share gains. In terms of the breakout by channel, delivery represented 45% of our transactions and 56% of our sales, while carryout represented 55% of transactions and 44% of our sales. The weight of sales and transactions shifted slightly more to carryout again in 2025 because of the carryout comp of 5.6%. The full-year delivery comp was up 1%. The strong comps that we had flowed through to franchisee profits, which we continue to believe are best in class. Our estimated average US franchisee store profitability in 2025 came in at approximately $166,000, up $4,000 over the prior year.

Shifting to US unit count, in Q4 we added 96 net new stores and 172 for the full year bringing our US system store count to 7,186. Moving to international, where retail sales grew 4.5% in Q4 excluding the impact of foreign currency. This was driven by net store growth of 296 and same store sales of 0.7%, both of which met our expectations. For the year, retail sales grew 5.9% with net store growth of 604 and same store sales of 1.9%. Excluding the headwind on our comp sales from DPE in 2025, we would have been in line with our long-term same store sales algorithm of 3%. Moving to capital allocation, this morning we announced a 15% increase in our quarterly dividend which was done in line with our capital allocation priorities. We also repurchased approximately 189,000 shares for a total of 89 million dollars in the fourth quarter. At the end of 2025, we had approximately $460 million remaining on our share repurchase authorization.

Now, let's talk about our guidance for 2026. Please note that all of the metrics provided exclude the impact of the 53rd week which we estimate will have an approximately 2% impact on global retail sales and operating profit growth for the year. We continue to believe that global retail sales growth should be approximately 6%. As part of that, we expect the following. First, we expect our US comp for the year to be 3% and to grow our market share meaningfully in what we expect to be a QSR pizza category that continues to grow. We also expect that based on the timing of certain initiatives that our comp will be higher in the first half compared to the back half. We also believe that the macro environment will remain pressured throughout 2026. Second, we expect our international same-store sales to be 1 to 2% due to continued pressures at DPE and impacts from our high-volume new store openings in China, which puts a slight drag on our comps despite being beneficial to retail sales. Shifting to net stores, we continue to expect 175 plus net stores in the US and we have a robust pipeline heading into the year to achieve this. Internationally, we expect to increase our net store growth to approximately 800 stores. This increase is primarily due to DPE's expectation of fewer closures and continued meaningful net store growth from our two largest growth markets, China and India. All this leads to operating income growth of approximately 8% excluding the impact of foreign currency and refranchising gains.

A few additional points of color on expectations for the P&L in 2026. We expect our food basket to be moderate, up low single digits. Our supply chain margins to grow year over year due to procurement productivity. We do expect the amount of procurement productivity to be less moving forward than we have seen in the last couple of years. G&A as a percentage of global retail sales to be approximately 2.3%. In February of 2026, we increased the technology fee by 1 cent to 38.5 cents per digital transaction to fund our technology initiatives. Operating income margins to expand slightly in 2026, primarily driven by sales leverage and supply chain margin expansion. Interest expense to be generally in line with 2025. At current exchange rates, we expect foreign currency to have a modest benefit on operating income. We expect our tax rate to be in the range of 21 to 23%, which is consistent with 2025. And lastly, we expect CapEx to be approximately $120 million due to investments we plan to make in our corporate office before reverting to our algorithm of $110 million in 2027. Thank you. We'll now open the line for questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question comes from Brian Bittner with Oppenheimer. Your line is open.

Thank you. Good morning. The question we continue to get, as you're well aware, is just related to investors' skepticism about whether you can keep up the solid performance moving forward in '26 after a very successful '25. And taking market share remains an important component of hitting your same-store sales target. So, can you talk about what you see as the biggest share drivers in '26? Do you think there's actually an opportunity to accelerate share gains in light of competitive closures? And just separately on the industry, it does continue to grow, which I do think may be an underappreciated dynamic. Can you just maybe talk about what's driving the stable growth of the industry? Thanks.

All right. So let's talk about industry growth. And I think that to me, as going through even what we talked about the last quarter, we talked about this on the call. This industry has been growing 1 to 2% for definitely since 2019 and even further back. And what we saw in '25 was very representative of what the industry has been doing over the years and we expect it to continue to be doing the same thing going forward as well. And so when we think about this, what is really impressive for us is the way we've actually consistently been gaining market share from our competitors. And I think this is actually highlighted by two things. One is our consistency in driving same-store sales growth. The other is our franchisee economics, which are significantly better than the competition. We opened '25 with a massive gap against all of our competitors, including the bigger national competitors. Guess what's happened since that time? One of our national competitors has announced that they've had a negative same-store sales in the mid-single digits, and they also talked about closing a number of stores, up to 250 stores in the first half of the year. All this plays into our strategy to continue to gain market share, because we will go into that 1 to 2% growth in the industry with less doors outside, which we can actually take share from effectively and grab those sales. And this is just a continuation of what we talked about at Hungry for More, and what we've been doing for years. That's how we look at what's going to come in 2026 and beyond.

Thank you. Our next question comes from Dennis Geiger with UBS. Your line is open.

Great. Thanks, guys. Congrats on the strong 4Q and full-year results. Russell and Sandeep, I wanted to ask a bit more on the US sales outlook for that 3%. You guys gave a lot of detail around plenty of runway from those existing initiatives that you came out with last year. Would it be possible to kind of highlight how you think about contribution from those existing initiatives versus maybe some of the newer stuff, whether it's the two items, other promotional deals this year from newer stuff? Any high-level thoughts just on hey, is the bulk of what drives the US comp from initiatives that are already in play versus some of that new stuff that may come out this year that we'll see more as the year goes on. Thank you.

Hey, Dennis, it's Sandeep. So, I'll take this one, and I'm going to just do a bit of a framing, and then I'll get into some of the initiatives that Russell already talked about, but I'll just repeat them afterwards. So, first of all, I think from a same-store sales perspective, we talked about 3% for the year. We did say it's going to be higher in the first half than the second half, and I would be remiss if I didn't address what I think a lot of the industry's already been talking about, which is weather has been tough in January. It had a disruption on us. We had to close a number of stores like many others, and that factor is included in our same-store sales estimate. So, we acknowledge the pressure in the early part of the quarter, but I think in our business, weather tends to even itself out over the year. And so, as far as they're concerned for the full year, we don't see that being an impact, but clearly it was a disruption in January, and I want to make sure we hit that and make sure we address it. So, in terms of the initiatives, Russell talked about a lot in the prepared remarks, but look, the thing about our business, and I'll acknowledge this, last year definitely had a few headline events that we talked about in 2025. We were really thrilled with Parmesan Stuffed Crust. We were really excited to be launching with DoorDash. And I think the really cool thing was we've already talked about renowned value, and then we brought in Best Deal Ever that ended up being a significant comp driver. None of these go away. They're all definitely there in the business in our baseline, and we expect these to compound over time as we move forward. In addition to that, Russell talked about the carryout business, which has been on a tear. I mean, we grew 5.6% on the back of significant growth in the previous year as well. And just going back to the fact that we've actually gotten to $4.4 billion on the carryout business, which is bigger than two of our national competitors on their total business. So, in order of magnitude, with that kind of base, the compounding impact of growth on our total sales is very material. You then take the layer that we...

added as an accelerator to it, which is the loyalty program that we launched in '23. We stated before that our objectives with the loyalty program was definitely to be catered much more to the carryout customer, and also to attract light users. And we just talked about the fact that we're up 20% on the number of customers that have come into our loyalty program. So, that becomes an accelerator to this fantastic carryout business that we're talking about. And then last year when we initially talked about it, we talked about value, but we didn't talk about Best Deal Ever. But Best Deal Ever came, and it actually drove significant value for our consumers and for our profits as well. So, we have a whole bunch of initiatives back to what Russell talked about on the menu items that are going to come out, and we're going to lean on our four pillars. We're going to lean on our four pillars and drive multiple initiatives that add up to the set 3%. We don't talk about all of them just from a comparative perspective, but believe me, the competitors will find out as we go through the year.

Thank you. Our next question comes from David Palmer with Evercore ISI. Your line is open.

Thanks. You know, question on delivery. I think one of the things that to this is a bit of a follow-up to Brian's question is, you know, just people have a hard time seeing long-term sustainable delivery same-store sales growth. And they look at what happened in '25, particularly the fourth quarter. There was the Best Deal Ever and more promotional intensity, but also obviously DoorDash. And the delivery comp was 1.6%. It's up, but that was a lot of firepower against it. It felt unusual. So, I guess maybe, you know, how do you reflect on the fourth quarter, the 1% for '25, and just your outlook for delivery, that's half of the business going forward on a sustainable basis. Thank you.

And David, I think I'm just going to add a financial component just to make sure that we understand. I think Russell talked about that we're managing the business for incrementality and profitability and really playing the long game. But I think when you put numbers to what Russell was talking about, you take the 1% same-store sales, you add the store growth, you're talking about 3% or around 3% growth in retail sales on delivery business, which far outpaced QSR pizza delivery, and we gained share. We gained about a point of share in delivery, we gained about a point of share in carryout, and a point across the entire business. So, we're really happy with the delivery business and what we got out of it in 2025, and we're very confident as we move forward in 2026 as well, especially given the really tough macro backdrop that we've been seeing in 2024 and 2025.

Thank you. Our next question comes from David Tarantino with Baird. Your line is open.

Hi. Good morning. Russell, I think you mentioned the concept of doubling the US retail sales over time, and I don't recall you mentioning that before. So, I guess if you can clarify that, is it a new goal to do that? And then I guess my questions are, you know, over what time frame do you think that's possible? And does that sort of imply you're thinking a little differently about the unit opportunity? I think you mentioned 8,500 plus at the last investor meeting. Is it now something maybe higher than that as you think about the current competitive landscape? Thanks.

Yeah, and David, I think from a guidance perspective, we've already talked about guidance through 2028. And that already implies a point of share through 2028. And we're only going to comment past 2028 in terms of cadence. But, I think we're just framing the opportunity, just like we did say 8,500 stores. We now believe that there's an opportunity to get to double our retail sales of about 10 billion over time. And saying that's really super important. And I think the other thing that Russell said at Investor Day, if I remember right, is every single time we thought we'd actually come up with a new goal in terms of full potential, that goal just kept going up. I think it was in the 600s, and then it was 6,000, and then it was 7,000, and it's 8,500. And it's not because we're bad at forecasting.

Thank you. Our next question comes from Peter Saleh with BTIG. Your line is open.

Great. Thanks and congrats on a great quarter and a year. I want to ask maybe if you guys could comment a little bit on the performance by income cohorts. It's been a lot of discussion about that younger, lower income guests kind of stepping back. If you guys could give us a little bit of color on what you're seeing there. And then also, you know, historically you've been talking about how delivery and carryout are kind of separate occasions, different customers. Has that changed recently? Have you seen any more switching between the two or has that stayed pretty consistent? Thank you.

I'll maybe do the income cohort question and you can follow up. Yeah, Pete, morning. We, you know, certainly in QSR there's been a lot of stuff written about the lower income cohort declining. That is not something that has happened at Domino's. We grew all income cohorts in Q4 and for the full year.

Yeah, and look and we've been seeing very consistent results in terms of the delivery carryout overlap. It's been the mid-teens over time and we haven't really seen a change on that. So, these tend to be very different occasions and that's great because the addressable market is available for both sides.

Thank you. Our next question comes from Gregory Frankfort with Guggenheim. Your line is open.

Hey, thanks for the question. My question is just Russell, can you provide an update on maybe changes in 2025 to your tech stack or you guys are known as a technology forward company and then as you look to holes or things you're trying to address in 2026 and the next couple years, what stands out? Thanks.

Thank you. Our next question comes from Danilo Gargiulo with Bernstein. Your line is open.

Great, thank you. Sandeep, I wonder if you can give some color on these insurance costs, like how sizable insurance costs are impacting your restaurant level margins in your stores. And more in general, can you comment on the level of restaurant level margins that you're targeting this year? And what do you think is sustainable, maybe not just for Domino's, but for the restaurant industry, or maybe for the pizza category as a restaurant level margin going forward? Thank you.

Yeah, Danilo, thanks for the question. And look, I mean, I think when Russell and I talked about in the prepared remarks as well, that the corporate stores, which are about 260 out of the total 7,100 that we have roughly, is one that was impacted by the outsized insurance cost. It definitely impacted the corporate store P&L. I just want to first just say, yes, this was material to the corporate store P&L, and it was big enough that we called it out at the company level as well. However, when I look at the franchisee performance, and I look at what we actually delivered as a franchisee performance, we had a 3% same-store sales growth last year. And if you go to the franchisee economics, it grew at approximately the same rate. So, we held the margins, and so including all of these insurance pressures, there are levers that the franchisees in the much larger portfolio that we have in their remit, basically are driving very good profitability. So, we don't really have concerns about the franchisee economics, and I want to make sure that I touch on that. That being said, we're conscious of the fact that there's insurance pressure in the marketplace, and it did impact us. And so, we want to acknowledge it, we want to be clear, and we need to find ways to find productivities to offset some of these pressures, and we did in 2025. And we're able to actually find a way to actually grow our profit 8%.

And to add to that, I'd say, you know, the other thing to think about is on the franchisee side, you know, we ended last year the average number of stores per franchisee was nine. And so, the enterprise profit for a franchisee is, you know, kind of approaching one and a half million dollars now, which, you know, if there are bumps in a particular year, allows them to get through those bumps. And so, we're excited not only that the store level profits are increasing, but the enterprise ones are as well.

Thank you. Our next question comes from Sarah Senatore with Bank of America. Your line is open.

Oh, thank you. Actually, one quick follow-up and a question. The question is actually about the delivery business, and maybe it's broadly across the industry. It seems like exclusively the growth, and this is not just pizza, this is everywhere, is coming in 3P versus 1P. So, we hear a lot from other companies talking about how, you know, 1P has either been steady or mostly, you know, has declined. So, we're just curious whether you think, you know, there is continued opportunity to grow, you know, 1P delivery, again, this is more industry-wide, or if we've sort of gotten to a point where growth kind of comes exclusively on the aggregators, again, for the restaurant industry as a whole. And then, just quickly on the comp, I don't know if you just closed the price you had on the fourth quarter, but just wanted to see if I could get that. Thank you.

Hi, Sara. Yeah, no, I'll address both these questions. And let's start with the delivery business. And I think it's more of a broad industry comment that you're making on 3P versus 1P. And I guess with 3P having really been in place for close to a decade at this point, and as we gained scale around the time of COVID, many other restaurant companies had already gone on to the 3P world before we did. We only got on '23, '24. So, we're in the process of getting on the 3P like Russell talked about earlier. So, I think it's a little bit early to actually see kind of what's happening overall. We have a sense that overall, the delivery business has been pressured in the last couple of years with the macro. But it still grew. And I think we still are seeing share growth overall. And we're managing for incrementality and profitability like we talked about. So, we do see that once things stabilize and normalize, once we've annualized completely on 3P, there should be growth both in 3P as well as 1P, and we should participate in both sides. So, with that, I'm actually going to move to the comp question that you had, and you asked about pricing. And you may have missed it, but I said pricing was flat. And that's why we are so happy with our franchisees, the discipline that our franchisees have actually shown over the last few years going into Hungry for More and then since we've been executing Hungry for More has been fantastic and that's why when Russell talked about profit power versus pricing power, this is exactly what it is. With that type of pricing, we're able to drive incremental profits to our franchisees and these economics are just the envy of I'm sure of everybody in the industry.

Thank you. Our next question comes from John Ivankoe with JP Morgan. Your line is open.

Hi, thank you. The question is on US store growth and certainly Russell your comments around you know the US market opportunity being double what it is is very interesting. So you know comment on you know the path to 7,700 US system stores in 2018. If we have a chance to front load any of that especially given some competitor kind of softness, you know is there a date you know where you could do 8,500 stores in your mind and you know, I know you've you know, kind of been doing under 200 stores a year net in the US. Does it make sense to actually go higher given higher market opportunity and where I'll conclude this question and they're all related into one is how we're thinking about store splits. In other words, the impact of a new store sales on existing stores that very well may share an existing delivery trade area. Are you able to better measure that and perhaps minimize impact to a market overall. Thank you so much for answering the new store development question. Thank you.

Yeah, and I think John, you did mention splits and the impact of splits. So, this is the reason to be very careful at what pace you go because when you do do the splits initially, you take a little bit of a step back and then you grow into it. So, the profitability of the franchisees needs to be protected as we go along this growth path, and that's exactly the approach that we take. And it's because we're protecting that profitability, back to what Russell said, seven stores last year, six stores the previous year. And that's something that we keep in mind and are very careful and conscious about to not go so fast and recklessly where you could have an impact where you end up having store closures. We want to protect against that. Not go so fast, but still faster than anyone else with over 3,000 stores in the US. Yes.

Thank you. Our next question comes from Chris O'Cole with Stifel. Your line is open.

Thanks, guys. This is Patrick on for Chris. My question was just on international development. I was hoping you could comment a little bit more on the visibility you have into the pipeline today for '26. Just any potential risks to that 800 units this year and just your level of confidence around how achievable that is and a longer term, I mean, I know it's been a couple of years and you talked about the importance of getting DPE back to being a net contributor, but do you have multiple paths to get back to that, you know, 975 a year over time? You know, can India accelerate or China or does it have to be DPE getting back to the level of contribution that they had previously? Thanks.

And Patrick, I'm just going to add one thing just on the guidance topic since you brought it up, and you asked about the multiple parts, and two different things. When we look at where we are either for the last year or for the guidance that we're talking about, really speaking, excluding the impact of DPE, generally we're in line with the rest of the international portfolio. And while India and China have been doing fantastically and accelerating, that was already in kind of what our expectations were. So, it's great, but I think I just wanted to make sure that you're clear about that, and I don't believe that ex-DPE getting back to what our initial assumptions are, there's a pathway to get to the 925 that we initially guided to. Because everything's just really running to plan. It's not running ahead of plan. And so, I just want to make sure that that's clear as we talk about the outlook for the year.

Thank you. And our final question comes from Jeff Farmer with Gordon Haskett. Your line is open.

Thank you very much. Just a quick follow-up to Sarah's question and then another one real quick. But what menu pricing is assumed in that 3% same-store sales guidance for 2026 coming off the flat pricing in Q4? And then can you guys just share any impact you've potentially seen as relates to GLP-1s and your business? Just any update there would be helpful. Thank you.

Yeah, I'll do the GLP-1 and then share the pricing. Yeah, so on GLP-1 obviously we continue to watch that closely. We have not seen an impact on our business so far. Obviously with it coming out in pill form, we're going to wait and see if there's any implication there. Right now though when you read the literature on GLP-1s it's really more kind of breakfast and lunch focused. And you know, dinner for us is a sharing occasion. So perhaps that's why we're not seeing any impact. But we're going to continue to watch it and with, you know, 34 million ways to make a pizza, we got a lot of choices out there. But if there needs to be menu innovation around that, we will do that.

Yeah, and I think specific to pricing you'll probably catch it in the transcript when you read or listen to it later. But we talked about low single digit expectations on pricing for 2026 and that's what's embedded in the 3% guide.

Thank you, Jeff. That was our last question of the call. I want to thank you all for joining our call today and we look forward to speaking to you all again soon. You may now disconnect.