Executive Summary / Key Takeaways

• Strategic Resilience Amidst Headwinds: Domino's "Hungry for MORE" strategy, emphasizing renowned value, operational excellence, and product innovation, is successfully driving market share gains in a challenging QSR environment characterized by pressured consumer spending and intense competition.
• Technological Edge & Operational Efficiency: Proprietary technology like Dom.OS and DJ dough stretching machines, alongside a new e-commerce platform, are foundational to Domino's competitive moat, significantly improving product consistency, delivery times, and store-level productivity, directly translating to enhanced franchisee economics.
• Strong U.S. Performance & Aggregator Expansion: The U.S. business is robust, with Q2 2025 same-store sales up 3.4% driven by the Parmesan Stuffed Crust launch and loyalty program. The national rollout with DoorDash (DASH) is expected to be a meaningful incremental sales driver in the back half of 2025, further solidifying delivery market share.
• International Reassessment & Profit Protection: While international growth is tempered by macroeconomic and geopolitical uncertainties, leading to a revised 1-2% same-store sales outlook for 2025, Domino's asset-light model minimizes the impact on consolidated operating profit, which is still projected to grow approximately 8%.
• Sustainable Growth Outlook: Management reaffirms its long-term algorithm of 7%+ global retail sales growth and 8%+ operating profit growth for 2026-2028, underpinned by continued market share capture, strategic investments, and best-in-class franchisee economics.

The Global Pizza Powerhouse: A Strategy of Relentless Innovation and Value

Domino's Pizza, Inc. stands as the undisputed global leader in the pizza industry, boasting over 21,500 locations across more than 90 international markets, with approximately 99% of its global footprint operated by independent franchisees. This asset-light, franchise-centric model has historically generated substantial cash flows through consistent royalty payments and a robust supply chain. In a quick-service restaurant (QSR) landscape increasingly defined by pressured consumer spending and a fierce battle for value, Domino's has strategically positioned itself to not just compete, but to thrive.

The company's overarching "Hungry for MORE" strategy, introduced in late 2023, is a direct response to these market dynamics. It aims to deliver "MORE sales, MORE stores, and MORE profits" through four core pillars: Most Delicious Food, Operational Excellence, Renowned Value, and Enhanced by Best-in-Class Franchisees. This strategic framework is designed to leverage Domino's inherent strengths, particularly its technological prowess and operational efficiency, to capture market share and drive sustainable long-term growth.

Technological Differentiation: The Secret Sauce of Operational Excellence

At the heart of Domino's competitive advantage lies its deep integration of technology across its operations and customer experience. This isn't merely about digital ordering; it's about a foundational commitment to innovation that enhances every aspect of the business, from dough preparation to delivery.

Domino's proprietary Dom.OS operating system serves as the backbone, enabling seamless order processing and store management. A prime example of this operational excellence is the DJ dough stretching machine. Over 1,600 of these machines have been rolled out across U.S. stores, representing more than a 50% increase from late 2024. This technology offers a significant, quantifiable benefit: it reduces the time it takes for new team members to achieve competency in dough stretching from approximately 25 shifts to just 2 shifts. This dramatically improves product consistency and accelerates new employee integration, a critical advantage in a labor-constrained environment.

The cumulative effect of these operational improvements, including enhanced training programs for franchisees and operators, has been a remarkable reduction in average delivery times by two minutes over the last two years. This speed and consistency directly translate to higher customer satisfaction and repeat orders, reinforcing Domino's brand promise.

Looking ahead, Domino's is rolling out a new e-commerce platform in 2025, building on the development completed in 2024. This platform is designed to offer an improved user experience, visually highlight the deliciousness of its food, enhance the carryout experience, and provide better integration and personalization capabilities. The recent integration of Cash App Pay (SQ) in May 2025 further underscores Domino's commitment to payment flexibility and catering to next-generation consumers. These technological investments are not just about convenience; they are about solidifying Domino's competitive moat, driving operational efficiency, and ultimately boosting financial performance through higher order volumes and improved customer loyalty.

Competitive Landscape: Outmaneuvering Rivals in the Pizza Wars

Domino's operates in a highly competitive QSR pizza market, facing off against national chains like Yum! Brands (YUM)' Pizza Hut and Papa John's International (PZZA), as well as a fragmented landscape of regional and independent operators. Despite the QSR pizza category being roughly flat through the first half of 2025, Domino's has consistently demonstrated its ability to gain market share.

Domino's holds a significant competitive edge due to its unparalleled scale and integrated business model. From 2015 to 2023, Domino's opened approximately 1,750 new U.S. stores, while its top QSR pizza competitors collectively closed nearly as many. This aggressive expansion, coupled with a 1% gain in U.S. QSR pizza market share in 2024, highlights Domino's ability to outgrow its rivals. The company's U.S. retail sales were up 5.3% in 2024, significantly outpacing the QSR pizza category's growth of less than 2%.

Financial Comparison with Key Competitors (TTM):
Domino's demonstrates robust profitability metrics compared to its peers. Its Gross Profit Margin (TTM) of 39.61% is competitive with Yum! Brands' 47% (which benefits from a highly asset-light model) and notably higher than Papa John's' 28%. Domino's Operating Profit Margin (TTM) of 18.98% and Net Profit Margin (TTM) of 12.49% also reflect strong operational efficiency. Its EBITDA Margin (TTM) of 21.96% further underscores its ability to generate strong earnings before non-cash expenses. These margins are supported by Domino's efficient supply chain, which provides franchisees with favorable food costs, and its massive advertising budget, which is significantly larger than its competitors', allowing it to drive volume even with tighter store-level margins.

Domino's "Renowned Value" strategy is a key differentiator. While competitors are also pushing value, Domino's views its approach as an "offense," leveraging its scale and cost advantages to offer sustainable value that others struggle to match. The recent "Best Deal Ever" promotion, offering any pizza with any toppings for $9.99, exemplifies this strategy. Management believes that while competitors may offer similar promotions, their underlying economics are not as strong, leading to "pain in those P&Ls for their franchisees."

The launch of Parmesan Stuffed Crust pizza in early March 2025 is a strategic move to capture a significant market segment that Domino's previously lacked. Stuffed crust accounts for approximately 15% of competitors' mix, representing a substantial opportunity. Domino's chose to launch a medium-sized stuffed crust, which makes it "really, really difficult" for competitors (who primarily offer large stuffed crusts) to react with competitive pricing, further solidifying Domino's market share gains. This product is not an LTO (Limited Time Offer) but a permanent menu addition, signaling a long-term commitment to capturing this market segment.

Furthermore, Domino's expansion into aggregator platforms like Uber Eats (UBER) (achieving 2.7% of U.S. sales in Q3 2024) and the recent partnership with DoorDash (national rollout completed by end of Q2 2025) is a critical growth lever. Management expects the DoorDash partnership to be a "meaningful driver" to U.S. comparable sales in the back half of 2025, with an estimated 50% incrementality. This strategy allows Domino's to meet customers where they are, tapping into the fastest-growing segment within QSR pizza and expanding its reach to new customer cohorts, including higher-income consumers.

Financial Performance and Operational Momentum

Domino's demonstrated strong financial performance in the first half of 2025, reflecting the early successes of its strategic initiatives. For the two fiscal quarters ended June 15, 2025, consolidated revenues increased by 3.4% to $2.26 billion, driven by higher supply chain revenues, U.S. franchise royalties and fees, and U.S. franchise advertising revenues. Supply chain revenues, in particular, benefited from a 4.8% increase in food basket pricing to stores and higher order volumes.

The company's profitability also saw improvements, with gross margin increasing by 5.3% to $904.1 million for the two fiscal quarters, and the gross margin percentage expanding by 0.7 percentage points to 40.1%. This was primarily due to higher global franchise royalty revenues and gross margin dollar growth within the supply chain segment, driven by consistent procurement productivity and labor efficiency. While U.S. Company-owned store gross margin saw a slight decrease due to higher food basket pricing and insurance costs, this was largely offset by sales leverage and store-level productivity.

Net income for the two fiscal quarters ended June 15, 2025, rose by 4.8% to $280.7 million, translating to diluted EPS of $8.14, a 7.0% increase year-over-year. Operating income increased by 14.8% in Q2 2025 (excluding foreign currency impact), benefiting from lower general and administrative (G&A) expenses due to the non-recurrence of the 2024 Worldwide Rally and partially offset by $5.0 million in severance expenses from an organizational realignment.

Cash flow generation remains robust. Net cash provided by operating activities increased significantly by 33.8% to $366.9 million for the two fiscal quarters ended June 15, 2025. This strong cash generation supports Domino's capital allocation priorities, including shareholder returns. The company repurchased $200 million of common stock year-to-date Q2 2025, with $614.3 million remaining under its authorization. A quarterly dividend of $1.74 per share was declared in April and again in July 2025, following a 15% increase in the quarterly dividend announced in Q4 2024.

As of June 15, 2025, Domino's had approximately $4.98 billion in long-term debt. The company's Holdco Leverage Ratio of less than 5.00x allows for the long-term classification of a significant portion of this debt. Domino's expects to refinance its 2018 7.50-Year Notes and 2015 Ten-Year Notes, which are classified as current liabilities and mature in October 2025, prior to their anticipated repayment date.

Outlook and Strategic Initiatives

Domino's management maintains a confident outlook, reaffirming its "Hungry for MORE" strategy as the blueprint for future success. For 2025, the company anticipates global retail sales growth to be generally in line with 2024's approximate 6% growth.

The U.S. business is projected to achieve 3% same-store sales growth for the full year 2025, with performance expected to be higher in the second half due to the timing of key initiatives like the full marketing push behind the DoorDash partnership. This guidance assumes the current pressured macroeconomic environment in QSR Pizza persists. U.S. net store growth is targeted at 175+ new stores annually, supported by a robust pipeline, as new store openings contribute significantly to carryout volume and enhance delivery efficiency.

Internationally, the outlook is more cautious, with same-store sales growth expected to be 1% to 2% for 2025. This reflects potential global macroeconomic and geopolitical uncertainties, as well as ongoing efforts to address underperformance in certain markets, notably the impact of store closures by Domino's Pizza Enterprises (DMP) (DPE) in Japan. International net store growth for 2025 is expected to be in line with 2024. However, management emphasizes that the asset-light nature of its international franchise model means shifts in international sales have "less impact on company profits."

Overall, Domino's continues to target approximately 8% operating income growth (excluding foreign currency impact and specific one-time items like severance and refranchising gains). This profitability target is supported by ongoing procurement productivity within the supply chain, which is expected to slightly expand margins. Management has demonstrated agility in managing its P&L, pivoting investments to maintain profit growth even amidst sales softness. Savings from organizational realignments are being reinvested into critical areas like consumer technology, store technology, and capacity investments, further fueling future growth.

Looking further out, Domino's long-term algorithm for 2026-2028 remains unchanged: 7% or more annual global retail sales growth and 8% or more operating profit growth. While the impact of Domino's Pizza Enterprises (DPE)'s closures may cause 2026's outlook to be in line with 2025, the underlying growth drivers and strategic positioning are expected to drive sustained performance.

Risks and Considerations

Despite its strong positioning, Domino's faces several pertinent risks. The macroeconomic environment, characterized by inflation and pressured consumer spending, could continue to impact demand, particularly for delivery and lower-income consumers. The company is exposed to market risks from changes in food and commodity prices, which can affect supply chain margins.

Financially, the upcoming refinancing of approximately $1.15 billion in debt in October 2025 poses a risk, as the company expects to refinance at higher interest rates, which could increase interest expense. Foreign currency exchange rate fluctuations also present a risk to international royalty revenues. While management does not believe current legal proceedings or insurance reserves will have a material adverse effect, these factors warrant ongoing monitoring.

Conclusion

Domino's Pizza is executing a compelling investment narrative, leveraging its "Hungry for MORE" strategy to drive market share gains and profitable growth in a competitive and value-driven QSR landscape. The company's foundational strengths in technology, including its efficient Dom.OS system and innovative dough stretching machines, provide a tangible operational edge that translates into faster service, consistent product quality, and superior franchisee economics. This technological leadership, combined with a robust supply chain and an expansive advertising budget, enables Domino's to offer "renowned value" that competitors struggle to sustainably match.

The recent U.S. performance, fueled by the successful Parmesan Stuffed Crust launch and strategic aggregator partnerships, underscores Domino's ability to innovate and expand its customer base. While international markets present some near-term headwinds, the company's asset-light model and focused efforts to drive value and operational improvements are designed to mitigate profit impact and set the stage for a return to higher growth rates. For investors, Domino's represents a resilient market leader with a clear strategic roadmap, a proven track record of execution, and a commitment to long-term value creation through continuous innovation and an unwavering focus on its core competitive advantages.