Domino's Navigates Challenging Landscape, Focuses on Value Proposition

Domino's Pizza (DPZ) has reported mixed third-quarter results, with revenue falling short of Wall Street expectations but adjusted earnings per share exceeding estimates. The company has reiterated its commitment to value deals as it navigates a "pressured global marketplace."

Domino's Prioritizes Value Amidst Macroeconomic Headwinds

Balancing Revenue and Profitability

Domino's reported revenue of $1.08 billion for the third quarter, falling short of the $1.1 billion expected by Wall Street. The increase in supply chain revenue from higher order values and pricing was offset by a shift in the relative mix of products sold at the store level. However, the company's adjusted earnings per share came in at $4.19, surpassing the $3.65 estimate.

Weathering Macroeconomic Challenges

CEO Russell Weiner acknowledged that the company is facing a "pressured global marketplace," with a combination of macroeconomic pressures, geopolitical issues, and underperformance in international markets creating a drag on sales. The company's international same-store sales growth of 0.8% fell well below the 2.84% projected by Wall Street.

Focusing on Value Proposition

Domino's has made its value pillar a "primary focus" in the near term, as the company believes its value proposition provides a competitive advantage that can help grow its market share. The company has launched various value-driven promotions, such as the "MOREflation" deal and the return of the "Emergency Pizza" program, to appeal to cost-conscious consumers.

Navigating Competitive Landscape

The company is facing increased value competition from fast-food peers like McDonald's and Taco Bell, which have been aggressively pivoting to value offerings. Wedbush analyst Nick Setyan noted that this has limited Domino's near-term transaction share gains, and the company has yet to provide a "stepped-up response" in the near term.

Expanding Third-Party Delivery Partnerships

Domino's is looking to expand its third-party delivery service beyond UberEats to include DoorDash, which the company believes could provide a more significant impact on its business. The company sees the opportunity to be on all order aggregators as a $1 billion opportunity, which is "absolutely in [its] future."

Charting a Path Forward

Despite the challenges, Domino's remains optimistic about its long-term growth prospects. The company expects to end 2024 with annual global retail sales growth of approximately 6% and annual income from operations growth of around 8%, even in the face of a "challenging macroeconomic environment." From 2026 to 2028, the company anticipates annual global retail sales to grow more than 7% and annual income from operations to grow more than 8%.