Domino’s Pizza stock is showing upward movement. What’s driving DPZ shares up?
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Operator
Good day and thank you for standing by. 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 speaker’s presentation there will be a question and answer session. To ask a question during the session you will need to press STAR 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 Lamentchik, Vice President of Investor Relations. Please go ahead.
Greg Lemenchick (VP of Investor Relations)
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 Wiener, followed by our Chief Financial Officer Sandeep Reddy. The call will conclude with a Q and 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 forecasts. 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.
Russell Weiner (Chief Executive Officer)
Well thank you Greg and good morning everybody. I’d like to start by saying how incredibly proud I am of our team and franchisees as we continue to bring our hungry for more strategy to life and deliver some of the best results within all of QSR. Before I highlight our great 2025 and look ahead to 2026, I want to provide my perspective on the QSR pizza category in the us. There seems to be a narrative out there that pizza is a challenged and declining category. That is just not true. Looking back to 2019 you’ll find a category that has generally grown approximately 1 to 2% per year, including last year 2025. I am confident QSR pizza will continue to grow at this historical rate in 2026 and beyond. The pizza category is certainly mature, but do not let the challenges at some of our higher profile competitors drive a false narrative. Our competitors result are not a reflection of the category’s health or its future potential. Their results are a direct reflection of our strength. Domino’s has dominated the QSR pizza category for over a decade and we expect our momentum will continue. So to be clear, our growth prospects have never been greater because our brand has never been stronger. Our Hungry for More strategy is working and we’re leveraging the scale and advantages of being the number one pizza company in the world. I want to share what I think is the ultimate opportunity for Domino’s in the US When I look at our current market share in comparison to other leaders within QSR who own 40 to 50% of their categories, I believe that Domino’s can double our retail sales from where they are today. Double our retail sales?
We’ve already achieved this higher market share in some of our international markets and in some US markets today. I believe there is meaningful growth in front of us for many years to come. I’d now like to review 2025, another successful year for Domino’s. Despite a challenging macro environment that impacted the entire restaurant industry. We proved that when we execute against our Hungry for More strategy, we deliver more sales, more stores, more market share and more profits. Let’s start with sales. We grew both our carryout and delivery businesses again this year in the US proving that our strategy and tactics are effective and producing best in class results. We also drove positive order counts in both our U.S. and international businesses. As you know, order count growth is key to long term success in the restaurant industry. Next stores. We drove global net store growth in line with our expectations. In the US we opened 172 net stores, which is impressive in absolute and relative terms. When we benchmark versus all traditional public QSR brands of more than 3,000 units. From 2019 through the third quarter of 2025, Domino’s is number one in net store growth, number one in pizza and number one in non pizza. We grew over 1,200 net stores while half the remaining top 10 public USR brands were negative over this period. In our international business, China and India continue to perform extremely well and opened almost 600 net stores combined last year. Market share in the US our same store sales growth of 3% and success in net store openings led to another point of market share gain in 2025. Domino’s has gained approximately 11 points of market share over the last 11 years. Finally, more profits. All of this growth culminated in a year where we grew company operating profits by more than 8% and our estimated US franchisee per store profitability grew to approximately $166,000. Our strong results can be linked to our strategy directly. Our initiatives were effective across all four of our hungry for more strategic pillars in 2025. I’m going to focus though on two of them. One from our most delicious food pillar, Parmesan Stuffed Crust and the other from our renowned value pillar Best Deal Ever promotion. Each of these initiatives had a strong 2025 and will continue to positively impact 2026 and beyond. We are really happy with the Parmesan Stuffed Crust launched and the way it performed throughout the year. It met our high expectations on every level mix incremental new customers and franchisee profitability. Most important, our in store teams continue to effectively execute this complex product while also handling the challenges associated with our record setting order volume in 2025 and in a year when customers continued to seek value, we innovated with our Best Deal Ever promotion promotion. This price point screamed renowned value and the taste of a pizza that can be customized and loaded with toppings drove our most delicious food perceptions with customers. This promotion also demonstrated our system’s operational excellence as we did a great job of handling these customized pizza. Finally, and most importantly, Best Deal Ever promotion drove franchisee profitability. The scale of our media and purchasing power enables us to drive the volume it takes to make a promotion like this profitable for our franchisees. You know, I’ve been asked whether or not QSR brands have pricing power anymore given the value consumers are seeking. As you can see from our 2025 results and our franchisees increase profits, Domino’s has something even more important than pricing power. We have profit power. We can offer value to consumers and still create profit gains for our franchisees. Now a big picture view of 2026 and why I believe we will grow our US comp by 3% during what we expect will continue to be a challenging macro environment. Domino’s plays the long game. We have a proven track record over the last 15 years. Our initiatives are rarely one and done. We identify opportunities that have multiple years of growth ahead of them. For example, we committed to building our US carryout business back in 2010. It didn’t stop growing the year after we launched the initiative. In fact, it has grown an average of 10% annually since that time. Our carryout business ended 2025 at approximately $4.4 billion. It has been a multiple year growth driver and I believe we still have meaningful growth ahead as we have yet to achieve the same level of carryout market share as we have in our delivery business. Another example of a multi year growth driver is our loyalty program we launched it in 2015 and made it even better in 2023. Domino’s rewards finished 2025 with 37.3 million active users which is up almost 20% since our relaunch. Our long term approach to initiatives apply to what we launched in 2025 and what we plan to launch in 2026. These initiatives are just getting started. We will continue to evolve our product offerings to meet consumer demands and preferences through two or more menu innovations. These will build on our successful product launches over the past couple of years that remain a key part of our future growth such as New York Style and Parmesan Stuffed Crust. I believe there is more growth to come from these trust types. We will continue to drive the renowned value initiatives that have powered our business. We already have proven winners such as Boost Weeks and our Best Deal Ever promotion promotion that we relaunched today and we have a team focused on coming up with new ideas that will grow our business into the future. In 2026 we expect continued growth on aggregator platforms, in particular on DoorDash, where we were not fully rolled out until mid year 2025. We expect our share on DoorDash to grow as awareness and marketing spend increases. This opportunity is meaningful as we have not yet reached our fair share on either of the major aggregators. Our business will be amplified this year by our enhanced E Commerce platform which is a better experience for our customers and our brand refresh that has given Hungry for More a unique look, sound and heartbeat. Lastly, our scale advantages will continue to be a differentiator. We have best in class franchisee economics in QSR pizza, the largest advertising budget and a supply chain with incredible purchasing power. As a result, we expect our franchisee store level EBITDA to continue to grow in 2026. Now turning to our international business where we delivered a remarkable 32nd straight year of same store sales growth in 2025. We expect another year of same store sales growth in 26 and an acceleration in net store growth. Our international business has generally tracked in line with the goals that we set forth back at our investor day in late 2023. Apart from Domino’s Pizza Enterprises, we continue to work closely with them to turn their business around and are encouraged by the hiring of their new CEO Andrew Gregory that they announced recently. Mr. Gregory is a well qualified global QSR executive and brings more than 30 years of QSR experience to the role. Getting the DPE business back on track remains a top priority as it is key for us in order to return to our international algorithm. In closing, I want to reinforce the same message I’ve shared with our team. Our strategy is not just about what we are doing, it’s about how we are doing it. We remain focused on getting stronger every day. We build for the present and the future. Domino’s has always been in the business of creating our own tailwinds and driving growth that has been and will continue to be how we drive best in class results and long term value creation for our franchisees and shareholders. I’ll now hand the call over to Sandeep.
Sandeep Reddy (Chief Financial Officer)
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 a challenging macro environment. 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 U.S. 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 and 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 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 $80 million 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 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 expectations first, we expect our U.S. 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 ...
