The operator introduces the Domino's Pizza fourth quarter 2023 earnings conference call and reminds participants that the call will be recorded. The host, Greg Lemenchick, introduces the speakers and reminds listeners of the forward-looking statements and risk factors. The CEO, Russell Weiner, discusses the company's strong performance and the success of their "Hungry for MORE" strategy. The CFO, Sandeep Reddy, will also speak, followed by a Q&A session.

Domino's has reported strong same-store sales and transaction growth in both delivery and carryout, demonstrating the success of their Hungry for MORE strategy. This strategy aims to increase sales, stores, and profits through four pillars: M for the most delicious food, O for operational excellence, R for reaching more customers, and E for expanding globally. The company is focusing on promoting their Pan Pizza and showcasing the variety of crust options they offer. They are also implementing a new service program in 2024 to further improve customer experience.

The third pillar of the program is focused on renowned value and consists of three product training sprints. The goal is to improve consistency in food by providing proper teaching, tools, and processes for team members. The program includes a loyalty program, national promotions, and a rollout on Uber. The Domino's Rewards program has already seen success with increased active members, redemptions, and profits for franchisees. The current national promotion is the perfect combo, which is considered the best deal in the QSR industry.

In January 2020, the company brought back its carryout special boost week, which exceeded expectations and showed that customers want value. The company also entered the aggregator marketplace with Uber, which has been successful and is expected to continue growing. The company added 60 new franchisees in 2023 and ended the year with strong store growth and profits. The CEO is excited about the company's future and believes they will continue to succeed and drive returns for franchisees and shareholders.

In the fourth quarter, the company saw growth in global retail sales, excluding the impact of foreign currency, due to positive U.S. comps and net store growth. The U.S. business saw an increase in same-store sales driven by transaction growth from a new loyalty program, pricing, and a sales mix from Uber. The company also added 92 net new stores in the U.S. during the quarter and 168 net new stores for the year.

The company-owned store gross margin decreased in the fourth quarter of 2023, but excluding certain costs, margins would have expanded. The company's unit economics remained strong, with franchisees seeing continued EBITDA growth. International same-store sales increased slightly, but were impacted by pressures in Europe and geopolitical tensions in the Middle East. The company's international store count also increased, with a total net store growth of 870 across the globe. Income from operations increased in the fourth quarter, but would have been higher without the impact of a prior re-franchising gain. The company's 2024 outlook remains in line with previous guidance, with expected growth in global retail sales and U.S. comps above the long-term guide.

The company expects their sales with Uber to increase throughout the year, with a 3% or more sales mix by the end of the year. They anticipate a modest price increase in the U.S. and soft international comps in the first half of the year, but expect them to accelerate in the second half. They are also expecting 1,100 or more net stores, with a significant increase in international net store growth in the back half of the year. They anticipate an 8% or more increase in operating income, with a 1-3% increase in their food basket due to moderation in cheese prices. They do not expect foreign currency to have a significant impact in 2024.

In summary, the meeting expects the Q1 food basket to be deflationary, with moderate increases for the rest of 2024. Supply chain margins are expected to be flat for the year, with a slight increase in Q1 and a moderation for the rest of the year. The technology fee will be lowered and the advertising fund contribution will be increased in Q2 2024. Operating income margins are expected to be flat compared to 2023, with no cost leverage due to investments in technology and supply chain capacity. Q1 margin expansion is expected due to lower inflationary pressures, while Q2 margins will be down due to G&A spend. The back half of the year is expected to have flat margins.

The speaker concludes by mentioning the company's recent increase in dividend and share repurchase authorization, in line with their capital deployment priorities. They then open the line for questions and the first question is about the company's core business and the expected increase in Uber mix. The speaker explains that they are seeing a meaningful uptick in Q1 and expect the Uber mix to continue to grow as awareness increases. The next question is about the quarter and the speaker thanks them and congratulates them.

The speaker discusses the company's Hungry for MORE strategy and the importance of value in it. They also mention the success of their recent carryout promotion and their plans to continue offering value deals in the future. The speaker expresses confidence in the company's unit growth and global expansion plans for the next five years.

The speaker discusses international store closures and their impact on the company's overall performance. They mention specific markets that were affected and highlight the positive outlook for future store openings. The speaker also addresses a question about expectations for 2024 same-store sales, emphasizing the potential for growth in both carryout and delivery transactions.

The first part of the year focused on fixing delivery times and franchisee profitability. In Q4, the Hungry for MORE strategy was implemented, which included delicious food, innovation, and promotions through the loyalty program. The company expects both carryout and delivery orders to be positive. The loyalty program has been successful, adding 3 million customers and engaging lower-frequency and carryout users. The Emergency Pizza promotion further boosted numbers, and the company has more ideas in the future to drive loyalty.

The speaker provides more information about the users of the company's program and how it has been successful in increasing frequency among lower frequency and carryout customers. The program has also been profitable for franchisees due to the food costs at different tiers. The next question is about profit drivers for the upcoming year, specifically company-owned stores and supply chain. The company stores' profitability was slightly disappointing in the quarter, but franchisees did well. The speaker mentions some factors that impacted margins in the fourth quarter, such as insurance costs.

The paragraph discusses the impact of two factors on the company's margins and profitability: the new loyalty program and supply chain improvements. The loyalty program has been successful in driving transaction growth, and the company expects it to continue to drive profit in the future. The supply chain has also seen profitability due to productivity improvements and is expected to see further growth from increased transactions. The Emergency Pizza promotion may have contributed to the recent transaction growth, but it is unclear how much.

Russell Weiner and Sandeep Reddy discuss the success of the recent promotion, Emergency Pizza, and how it drove people into the loyalty program. They also mention the potential for future promotions using the loyalty program as a platform for their third pillar, renowned value. They believe this approach will continue to drive transaction growth for Domino's.

The speaker discusses a key strategy for driving transaction growth in 2024, which involves using promotions to attract customers to the loyalty program. They also highlight the success of a recent promotion, Emergency Pizza, and plan to continue using similar tactics. The speaker then answers a question about the brand's performance in Continental Europe and potential learnings for the U.S. market. They also address the impact of online ordering fees on the company's P&L and the possibility of reducing them in the future.

Russell Weiner and Sandeep Reddy discuss the challenges and successes of Domino's Pizza Enterprises (DPE), the master franchisee in Europe. While there have been some challenges in markets like France, DPE has seen success in other markets like Australia and New Zealand by focusing on the "M" in Hungry for MORE. The company expects to see pressure in the first half of the year but is confident that the implementation of more initiatives will lead to an improvement in the back half of the year.

In the paragraph, the speaker discusses the increase in franchisee profitability and the decision to temporarily halt advertising fund contributions while increasing the technology fee. They also mention the expected franchisee EBITDA for 2024. The speaker then answers a question about the supply chain profit dollar growth, stating that a significant portion of it came from productivity improvements and that they expect this trend to continue into 2024.

The speaker discusses the success of their loyalty program, which has gained over 2 million new members since its launch. They attribute this growth to the strong market conditions and productivity improvements in 2023. However, they anticipate that profit growth in 2024 will be driven by transaction growth and productivity improvements, with some offset from investments in capacity. The speaker also mentions that the productivity gains from the previous year will continue to benefit the company going forward. The loyalty program saw a significant increase in membership upon its launch and the speaker expects this trend to continue in 2024. They do not provide specific information on the breakdown of new loyalty members between carryout and delivery customers.

The company has seen success with their loyalty program and the addition of Emergency Pizza. They plan to continue driving this business in the first quarter. The program has helped engage carryout customers and light users. During the earnings call, Sandeep clarified that company margins would have been up slightly if not for insurance and loyalty liability. This means that profit dollar growth should be the focus rather than margin rate expansion. As for the industry and pizza segment, the company has better insights into the competitive dynamic and it is unclear if the category improvement is due to share gains by Domino's or a general improvement in the industry.

The company has seen consistent margin expansion in the first three quarters, with the exception of insurance and loyalty liability impacts. They expect both profit dollar growth and margin expansion in company stores. They also believe that they will not face the same pressure on orders and transactions as other QSRs in 2024. The outlook for international sales improvement depends on both market-specific execution issues and macro pressures, such as those in India.

The speaker discusses the success of Jubilant, an Indian franchise, and their future growth plans. They credit their success to their focus on the "Hungry for MORE" strategy and the application of learnings from other markets. They also mention that they expect to see continued growth and success despite industry pressures. In response to a question, they clarify that their increase in transactions was across all income cohorts. They also discuss the speed of delivery in their own channel compared to their peers.

In the paragraph, Russell Weiner discusses positive transactions and speed of delivery as unique aspects of the company. He emphasizes the importance of maintaining quality and consistency in order to fulfill the company's promise of delicious food. Weiner also mentions the goal of selling one pizza a day 1 million times, rather than focusing on overall sales volume. A question from Jeff Bernstein from Barclays is mentioned at the end of the paragraph.

The speaker clarifies that the benefits of their new technology, Pulse 2.0, are already being seen in stores and will continue to be implemented throughout 2024. They are working with Microsoft on generative AI for both consumer ordering and improving the in-store experience for employees. More information will be shared in 2024.

In this paragraph, a question is asked about the current competitive environment and promotional strategies of the company. The speaker, Russell Weiner, responds by saying that they focus on improving themselves rather than worrying about competitors. He also mentions that they have recently launched a pan pizza, but it is not considered one of their two new products for the year. He does not want to discuss competitors, but is open to discussing their products.

Russell Weiner, CEO of Domino's Pizza, discussed the recent increase in new franchisees in the U.S. and how this reflects positively on the future of the brand. He mentioned that the company expects to beat their goal of 175 new franchisees by 2024 and already has 170 potential franchisees in the pipeline. This indicates strong confidence in the brand and a positive outlook for growth.

The speaker responds to a question about tracking the liability and breakage levels of the loyalty program relaunch. They emphasize that the program is working as intended and expect to see more redemptions in the future. They also mention that profit dollar growth and margin expansion will be important measures of performance. The next question is about the effectiveness of advertising on Uber, and the speaker explains that there are two types of advertising on the platform and that it is currently very promotionally driven.

The speaker discusses the company's success on marketplaces like Google and Uber, and their confidence in increasing their sales. The operator clarifies a question about a one-time liability and asks about changes in customer frequency in the loyalty program. The speaker explains that the liability was a one-time event due to a new program launch and that they are seeing expected changes in customer engagement.

The speaker, John, explains that throughout the year, they will gather more information and provide perspective on their loyalty programs, which are focused on lifetime value and use over time. This concludes the call and the operator thanks everyone for participating.

This summary was generated with AI and may contain some inaccuracies.