Executive Summary / Key Takeaways

• Domino's Pizza, the world's largest pizza company, is executing its "Hungry for MORE" strategy to drive market share gains in a challenging QSR environment, leveraging its differentiated technology, operational excellence, and renowned value proposition.
• Recent performance shows mixed results, with Q1 2025 revenue increasing 2.5% year-over-year to $1.11 billion (missing consensus) and U.S. same-store sales declining 0.5%, primarily due to lower transaction counts impacted by macro pressures on lower-income consumers, while international same-store sales grew 3.7% (excluding FX).
• Profitability remains a strength, with Q1 2025 net income rising to $149.7 million ($4.33 EPS, beating consensus) and operating profit growing 1.4% (excluding FX), driven by higher gross margins from supply chain efficiencies and international royalties, despite increased G&A from restructuring costs.
• Strategic initiatives like the national DoorDash (DASH) partnership (launching May 2025, expected ~50% incremental) and the U.S. launch of Parmesan Stuffed Crust pizza are key catalysts expected to drive U.S. same-store sales towards the 3% target in the back half of 2025.
• While the long-term algorithm of 7%+ global retail sales and 8%+ operating profit growth is reiterated for 2026-2028, the 2025 outlook is tempered by expected 1%-2% international same-store sales growth and net store growth in line with 2024, primarily due to planned closures by a master franchisee (DPE), impacting the 2026 outlook which is now expected to be in line with 2025.

The Global Pizza Arena: Setting the Scene

Domino's Pizza stands as the undisputed leader in the global pizza market, operating over 21,300 locations across more than 90 countries, predominantly through an asset-light franchisor model. Its business thrives on two core service models: delivery and carryout. In an intensely competitive quick-service restaurant (QSR) landscape currently marked by pressured consumer spending and heightened focus on value, Domino's has sharpened its strategic focus under the "Hungry for MORE" banner. This strategy centers on delivering the Most Delicious Food, achieving Operational Excellence, providing Renowned Value, and being Enhanced by Best-in-Class Franchisees. The company's ability to gain market share in this environment is a critical measure of its success and the central theme underpinning its investment narrative.

The broader QSR industry faces headwinds from macroeconomic pressures, including reduced consumer disposable income and confidence levels, particularly impacting lower-income cohorts. This has led to increased competitive intensity around value offerings across the sector. Within the pizza segment specifically, the category typically grows at a modest 1% to 2% annually, and it started 2025 roughly flat. Despite this backdrop, Domino's has demonstrated an ability to outpace the category in retail sales growth and consistently gain market share, a testament to the effectiveness of its strategic pillars and differentiated capabilities.

Technological Edge: The Secret Sauce

At the heart of Domino's operational efficiency and competitive moat lies its robust, proprietary technology ecosystem. This includes the Dom.OS operating system, advanced e-commerce platforms, and innovative in-store technology like the DJ dough stretching machines. These technological assets are not merely supplementary tools; they are fundamental to the company's ability to execute its strategy and deliver on its brand promise.

The Dom.OS system and e-commerce platforms streamline the ordering and fulfillment process, providing a seamless customer experience and critical data for operational optimization. The company's investment in a new U.S. e-commerce platform, set to roll out in 2025, aims to further enhance user experience and visually showcase the deliciousness of its food, directly supporting the "Most Delicious Food" pillar. In-store technology, such as the DJ dough stretching machines, directly impacts operational efficiency and product consistency. Over 1,600 of these machines have been rolled out across the U.S., significantly increasing from late 2024 levels. This technology dramatically reduces the time it takes for new team members to achieve competency in dough stretching, from approximately 25 shifts traditionally to just two shifts with the DJ machine. This operational improvement contributes to faster service times; estimated average delivery times were nearly 10% better in Q2 2024 compared to Q2 2022, even as stores handled higher order volumes.

Domino's approaches product development with "innovation with intent," ensuring new offerings serve a strategic purpose and are integrated seamlessly into operations. The recent U.S. launch of Parmesan Stuffed Crust pizza in March 2025 exemplifies this. This product, which required three years of development to ensure operational readiness despite its complexity, addresses a significant gap in Domino's portfolio, as stuffed crust represents about 15% of competitors' mix. Its successful integration leverages the operational improvements driven by technology and training. For investors, this technological leadership translates into a competitive moat, enabling greater efficiency, cost control (particularly in the supply chain), improved customer experience, and the ability to introduce new products that drive incremental sales and market share gains in a competitive landscape.

Operational Excellence and Renowned Value in Action

Operational Excellence is intrinsically linked to Domino's technological capabilities and is a cornerstone of its "Hungry for MORE" strategy. Programs like "MORE Delicious Operations" focus on rigorous product training, ensuring consistency and quality from dough preparation to baking. This relentless focus on execution allows Domino's stores to handle high volumes efficiently and deliver on the promise of hot, predictable deliveries.

The company's "Renowned Value" pillar is brought to life through a combination of national promotions, the revamped Domino's Rewards loyalty program, and strategic engagement with aggregator platforms. Unlike competitors who may offer standard discounts, Domino's aims for value that is "innovative and memorable," such as the "Best Deal Ever" promotion in Q1 2025 offering any crust, any topping pizzas for $9.99 each online, or past initiatives like "Emergency Pizza" and "You Tip, We Tip." This approach is supported by the company's supply chain, which leverages scale and procurement productivity to manage food costs effectively. In Q1 2025, supply chain gross margin expanded by 0.5 percentage points, driven by procurement productivity despite a 4.8% increase in the food basket price to stores. This efficiency allows Domino's and its franchisees to offer compelling value sustainably, a critical advantage in the current price-sensitive market.

The Domino's Rewards program, revamped in 2023, has been a significant driver of transaction growth, particularly targeting light users and carryout customers. The program successfully increased active members by approximately 2.5 million in 2024, reaching 35.7 million users. Redemptions have increased across both delivery and carryout, with carryout orders using loyalty redemptions doubling in the first half of 2024 compared to the prior year. This program fosters frequency and loyalty, converting today's orders into future sales.

The Power of the Network: Franchisees and Global Reach

Domino's success is deeply intertwined with its best-in-class franchisees, who own and operate approximately 99% of global stores. This asset-light model provides significant cash flow to the parent company through royalties and supply chain revenues, while franchisees benefit from the strong brand, operating system, and marketing support. The health of the franchisee system, reflected in compelling store economics (average U.S. franchisee store profitability was approximately $162,000 in 2024) and strong paybacks, fuels continued network expansion.

U.S. store growth remains a key driver of market share gains. The company continues to target 175+ net new stores annually, supported by a robust pipeline and franchisee appetite. A significant portion of this growth comes from splitting existing territories, which drives substantial incremental carryout volume (estimated 80% incremental) and improves delivery efficiency by reducing drive times. This strategy allows Domino's to increase its presence and capture more of the carryout market, where its share is not yet as dominant as in delivery.

Internationally, Domino's operates through master franchisees in over 90 markets. This segment has historically been a strong growth engine, averaging over 10% retail sales growth over the decade through 2023 and achieving 31 consecutive years of same-store sales growth. However, the international business faced headwinds in 2024 and early 2025 due to macroeconomic pressures, geopolitical issues, and underperformance by certain master franchisees, notably Domino's Pizza Enterprises (DPE). DPE's planned closure of over 200 underperforming stores, primarily in Japan, significantly impacted global net store growth in Q1 2025. Despite this, growth in key markets like China (DPC Dash, targeting 300-350 openings in 2025) and India (Jubilant) remains strong. Domino's is actively working with international master franchisees to implement strategies proven in the U.S., focusing on consistent value messaging, maximizing aggregator partnerships, and developing carryout/dine-in opportunities to regain momentum.

Financial Performance: A Look Under the Hood

Domino's financial performance reflects the interplay of its strategic execution, operational efficiency, and the prevailing market conditions. In Q1 2025, consolidated revenues grew 2.5% year-over-year to $1.11 billion, primarily driven by increases in U.S. franchise advertising revenues (up 12.4% due to reduced incentives and a higher contribution rate), supply chain revenues (up 1.6% due to food basket pricing), and international franchise royalties and fees (up 5.0% ex-FX). However, U.S. Company-owned store revenues declined 1.1% due to lower same-store sales.

Profitability remained solid. Consolidated gross margin increased by 5.0% to $443.1 million, with the gross margin percentage expanding by 0.9 percentage points to 39.8%. This was largely fueled by the higher-margin franchise advertising and international royalty revenues, as well as improved supply chain margins. Supply chain Segment Income increased 12.8%, benefiting from procurement productivity which offset some food cost inflation. U.S. stores Segment Income decreased 3.2%, impacted by lower Company-owned store gross margin and a shift in labor costs. International franchise Segment Income grew 7.5% (ex-FX) on higher royalties.

Income from operations decreased slightly by 0.2% but increased 1.4% excluding the negative impact of foreign currency. Net income rose significantly to $149.7 million ($4.33 per diluted share) in Q1 2025, compared to $125.8 million ($3.58 per diluted share) in Q1 2024. This increase was boosted by a $24.0 million unrealized gain on the investment in DPC Dash, contrasting with an $18.7 million loss in the prior year, and a lower effective tax rate in the prior period. General and administrative expenses increased 8.0%, including approximately $5.0 million in severance costs from an organizational realignment.

Liquidity shows a negative working capital position of $880.4 million as of March 23, 2025, primarily due to the classification of $1.15 billion in long-term debt as current. The company relies on cash flows from operations and variable funding notes for liquidity. Operating cash flow increased by $55.6 million in Q1 2025, driven by favorable changes in operating assets and liabilities. Capital allocation priorities include investing in the core business, repaying debt, paying dividends ($1.74 per share quarterly), and share repurchases ($50.0 million in Q1 2025).

Competitive Arena: Outpacing Rivals in a Tough Market

Domino's operates within a multi-faceted competitive landscape that includes national pizza chains like Pizza Hut (YUM) and Papa John's (PZZA), regional and independent pizza operators, casual dining restaurants (Darden Restaurants (DRI), Texas Roadhouse (TXRH), Brinker International (EAT)), and increasingly, third-party delivery aggregators (Uber Eats (UBER), DoorDash). While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Domino's holds a leading position, though its U.S. market share is slightly short of one in four pizzas sold, leaving significant room for growth compared to market leaders in other QSR categories.

Domino's differentiates itself through its specialized delivery and carryout model, technological capabilities, and sustainable value strategy. Compared to national pizza rivals, Domino's supply chain efficiencies and operational technology contribute to lower operating costs and faster service. While competitors like Pizza Hut and Papa John's also offer value promotions and digital ordering, Domino's scale, advertising budget ($0.5 billion+), and franchisee economics allow it to sustain value offerings more effectively, potentially causing "pain in the P&Ls" for competitors attempting to match its promotional intensity. Over the last decade, Domino's has significantly outpaced national competitors in U.S. net store growth, further solidifying its market position.

Against casual dining competitors, Domino's competes on convenience and price point, particularly in the delivery and carryout segments. While casual dining offers a different experience and broader menu, Domino's efficiency in order fulfillment provides a distinct advantage for customers seeking speed and value.

The rise of third-party aggregators presents both a competitive threat and an opportunity. By partnering with platforms like Uber Eats (achieving 3% sales mix by end of 2024) and the recently announced DoorDash partnership (launching May 2025), Domino's is expanding its reach to customers who prefer ordering through these channels. This strategy is expected to be significantly incremental, particularly tapping into suburban and rural markets and a potentially different customer base than its direct channels. While this introduces complexity and potential margin considerations, it positions Domino's to capture share in the fastest-growing segment of the QSR pizza market.

Outlook and Risks: Charting the Course Ahead

Domino's outlook for 2025 reflects a blend of confidence in its strategic execution and acknowledgement of ongoing external pressures. The company continues to target global retail sales growth generally in line with 2024 levels (approximately 6% ex-FX). This is underpinned by a U.S. same-store sales target of 3%, heavily weighted towards the back half of the year as key initiatives like the DoorDash partnership ramp up. However, management cautions that persistent macro pressures could challenge achieving this U.S. target. Internationally, a more conservative 1% to 2% same-store sales growth (ex-FX) is expected for 2025, reflecting ongoing macro and geopolitical headwinds.

Operating profit growth is projected at approximately 8% for 2025 (excluding currency and severance), demonstrating the resilience of the business model and operational discipline. This growth is expected despite lower international sales growth and includes reinvestment of savings from organizational changes back into strategic priorities like technology and capacity. Operating income margins are expected to expand slightly, driven by supply chain efficiencies.

Net store growth in 2025 is expected to be in line with 2024 levels, primarily impacted by the planned DPE closures. While the long-term algorithm of 7%+ global retail sales and 8%+ operating profit growth for 2026-2028 is reiterated, the impact of the 2025 DPE closures is expected to pressure the 2026 outlook, which is now anticipated to be in line with 2025.

Key risks to monitor include the successful execution and incrementality of the new aggregator partnerships, the potential for persistent or worsening macro and geopolitical headwinds impacting consumer spending globally, and the ability of international master franchisees to regain sales momentum. Financially, the upcoming maturity of approximately $1.14 billion in debt in October 2025 presents a refinancing risk, with expectations to refinance at higher interest rates based on current market conditions, which will pressure interest expense. Volatility in commodity prices (especially cheese) and foreign currency exchange rates also pose ongoing risks to financial performance.

Conclusion

Domino's Pizza enters the latter half of 2025 as a market leader leveraging a well-defined strategy to drive growth amidst a challenging QSR landscape. The "Hungry for MORE" framework, powered by technological advantages in operations and digital ordering, a commitment to renowned value, and a strong franchise network, positions the company to continue gaining market share. While recent U.S. same-store sales faced headwinds from macro pressures, strategic initiatives like the DoorDash partnership and new product launches are expected to re-accelerate performance. The international segment, though facing near-term volatility from macro factors and specific franchisee challenges, retains significant long-term potential.

For investors, the core thesis rests on Domino's ability to translate its operational efficiencies and strategic initiatives into sustained market share gains and profitable growth, even if the path is not always linear. The tempered 2025 and 2026 outlooks, primarily influenced by international factors and debt refinancing, highlight areas requiring attention. However, the underlying strengths of the business model, coupled with a clear strategic playbook and a track record of outperforming the category, suggest that Domino's remains well-positioned for long-term value creation in the global pizza market.