Domino's Pizza Stock

Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the rescheduled Domino's Pizza, Inc. Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Gregory Lemenchick. Please go ahead.

Good morning, everyone. Thank you for joining us today for our second quarter conference call. Today's call will begin with our Chief Executive Officer, Russell Weiner; and incoming CEO, Joe Jordan; followed by our Chief Financial Officer, Sandeep Reddy. The call will conclude with a Q&A session.

The notices regarding forward-looking statements in this morning's earnings release and 10-Q, 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 forecast. 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.

Thanks, Greg, and good morning, everybody. I wanted to start off by welcoming Joe Jordan, our incoming CEO, who has joined us on the call this morning. I am thrilled that the Board unanimously elected Joe as our next CEO. He's an incredible leader whose experience spans virtually every aspect of our business over his 15 years with the company. Joe has earned the trust of franchisees across our global system, embodies the Domino's culture of developing leaders from within and is uniquely qualified to guide the company through its next phase of growth. Let me turn it over to Joe for a few comments.

Thanks, Russell. I'm honored to have the opportunity to lead Domino's, and I'm excited about the opportunities ahead. I've had the privilege of working alongside Russell for many years, and I want to thank him for his leadership and partnership. He has helped build one of the strongest businesses in our industry, and I'm grateful that we'll continue to benefit from his experience as he transitions to Executive Chairman next year. Having spent the last several years as COO, I've had the opportunity to work closely with our franchisees and our teams across the globe. That experience has only strengthened my belief in what makes Domino's unique.

We have an exceptional global franchise system, talented people, a culture of innovation and operational excellence and a brand that continues to earn the trust of customers every day. Those strengths give me tremendous confidence in our future. Our priorities remain clear: serving customers with delicious food, outstanding value and a great experience, supporting our franchisees and executing with discipline to drive long-term growth. I couldn't be more excited to lead this next chapter alongside the incredible people who make this company what it is. I look forward to engaging with you all more closely in my new role once I become CEO in October. Until then, my focus is on partnering with Russell and our leadership team to ensure a seamless transition.

Congrats again, Joe. The most important lesson I have learned in nearly 2 decades with Domino's, it's simple. Order counts drive long-term success. Order counts matter because they fuel growth for both the brand and our franchisees. The winners in QSR over time are the brands that can grow order counts while driving healthy ticket through disciplined pricing. That has been Domino's formula for success.

Since I joined the company at the end of 2008, we have more than doubled the number of orders coming through our system in the U.S., resulting in double-digit market share gains. This growth in transactions helped drive approximately $7 billion in additional retail sales, more than 2,100 net new stores and a nearly 240% increase in store level EBITDA for franchisees. Put simply, more orders and disciplined pricing have led to more sales, more stores and more profits. This formula has helped make Domino's the #1 pizza company in the world, and our growth opportunity remains substantial. With roughly 23% share of the pizza category, we still have significant runway ahead of us compared with leading QSR brands in other categories that command a 40% to 50% market share.

The QSR industry in the U.S. has been struggling with order counts during a difficult period of macroeconomic uncertainty. We believe this continued in Q2, where QSR order counts were flat. And despite this backdrop, demand for Domino's remained incredibly strong. While we have not shared specific order count numbers in the past, and I won't start sharing them now on my last call, what I will tell you is that our order counts were up meaningfully in total and individually in our delivery and carryout businesses. This means that while other restaurants were fighting for orders, millions of new customers came to Domino's. In the race for long-term dominance, our increase in order count during both the first and second quarters of this year highlights that more people are ordering Domino's than ever before.

Order counts are what drive our business. Orders bring people into our loyalty program flywheel, and they power our supply chain business. The order counts of today are consumers with whom we can drive frequency in the future. Now one of the reasons we grew orders in Q2 was tapping into the aggregator marketplace. We continue to grow on both Uber and DoorDash and believe that we are now the #1 pizza player on both platforms. Despite being #1, we have a significant amount of growth ahead of us to achieve our fair share. As we look at what consumers are ordering from Domino's on aggregators and look at where our customers go when they don't buy pizza, we see an opportunity in our portfolio and in the pizza segment for a new offering. We're bringing this product to market later this quarter, and I'll expand on that more in a minute.

While I'm energized at our long-term prospects given our ability to drive order counts in this environment, same-store sales in Q2 did not meet our expectations due to the miss on ticket. I don't believe this miss was due to macroeconomic headwinds. Those were assumed in our plan. The miss on ticket was largely within our control, which means we can and will address it moving forward. In Q2, we were lapping our Stuffed Crust Pizza launch, which carried a higher ticket and mix in the prior year. To roll over this, we launched our premium series, inclusive of our new [indiscernible] sauce. This did not resonate with customers the way it needed to. The messaging wasn't compelling enough. The result was a drag on ticket, which impacted our results. We expect this drag to be lower in Q3 as the mix of Stuffed Crust came down in the prior year when we shifted media to our next promotion. We also expect and are already seeing the quality of our messaging back at the high bar we set at Domino's.

On our last quarterly earnings call, I told you that we would be making changes in our 2026 marketing calendar for the second half of the year in light of what we were seeing in the competitive and macro environments. And we've done that. To start the third quarter, we changed our best deal ever and made it even better with the addition of Stuffed Crust. Customer reaction has shown that it was the right thing to do. Customers are enjoying getting our most indulgent pizza as part of this promotion that leverages both our most delicious food and renowned value hungry for more strategic pillars. Our revised calendar for the second half brings a pizza innovation in Q3 that is unlike anything we've offered before at Domino's. Similar to the opportunity Stuff Crust created by filling a gap in our menu offerings, we believe this new product will address an unmet consumer need, but this time, with a pizza that is unique to Domino's. This signature product will give customers a delicious new reason to come to Domino's while protecting the core pizza occasions that have been key to our success.

I will also tell you, it is my favorite pizza full soup and customers agree. It's one of the best tasting products we have ever tested. More to come later this quarter. As I finish up my last earnings call as CEO, I want to highlight why I remain so bullish on our business. Just like great pizza, the key to a great pizza company is its ingredients. The formula for success at Domino's remains the same. The only difference is our brand has never been stronger and our competition has never been weaker. We have the best ingredients in the business, both literally and figuratively, the scale, the team, the franchisees and an incredible new CEO and Joe Jordan. In the QSR industry, just like orders count, the team counts. The achievements of the Domino's team have been incredible, and we are just getting started. The global team and our best-in-class franchisees in over 90 markets around the world create the Domino's effect every single day. They are what makes us the #1 pizza company on the planet, and they are hungry, hungry for even more.

I'll now hand the call over to Sandeep.

Thank you, Russell. And once again, a huge congratulations to both you and Joe. It has been fantastic working and learning from Russell over the past 4 years as we welcome me into Domino's. Joe has been an incredible business partner for me. He has been just as welcoming and I've learned so much from him as well. I'm very much looking forward to continuing to work with Joe to drive our business.

Now let's jump into the results. Income from operations increased 2.6% in Q2, excluding the impact of foreign currency and refranchising gains from the sale of certain U.S. company-owned store markets in the second quarters of 2026 and 2025. This increase in operating income, which came in slightly below our expectations, was primarily driven by higher U.S. and international franchise royalties and fees. It also benefited from gross margin dollar growth within supply chain that was fueled by our strong order count growth in the U.S. These increases were partially offset by higher general and administrative expenses. G&A increased due to expenses related to our worldwide rally in the second quarter of 2026. The rally takes place every 2 years.

Excluding the impact of foreign currency, Global Retail sales grew 3% in the quarter due to global net store growth of almost 1,000 stores over the past 12 months. In Q2, retail sales grew by 1.9% in the U.S., driven primarily by net store growth, inclusive of 26 net new stores in the quarter. Same-store sales grew 0.1% -- our business continued to be impacted by a challenging macro environment, which is pressuring consumers as well as heightened competition. Our comp was comprised of a strong increase in order counts that drove the strength of our core business as well as continued growth in our aggregator business. This was offset by a lower average ticket.

As Russell noted, our ticket was impacted by rolling over our launch of Stuffed Crust in the prior year, which carried a higher ticket and a mix of orders while we were on media with it. Our planned lap with the premium series and Sliced sauce resulted in a mix that was below our expectations. Pricing was up 0.2% in the quarter, and our carryout comp was up 1.1% and delivery was down 0.7%. I wanted to take a moment to share some color on the QSR pizza category through the first half of 2026. The category continues to grow in line with our historical growth rate, and we continue to take share.

Category growth this year is being driven by the dine-in channel as some pizza consumers are returning to pre-COVID habits of wanting a dine-in experience. Independent QSR pizza restaurants have been the biggest beneficiary of this shift. Shifting to our international business, where retail sales grew 4.1%, excluding the impact of foreign currency in the quarter. This was primarily driven by net store growth over the last year, inclusive of 183 stores in Q2. Comp sales declined by 0.1% in the quarter as they continue to be impacted by Domino's Pizza Enterprises. They remain focused on turning their business around, and we continue to work closely with them on that. Comps were also impacted by macro and geopolitical uncertainty across the world in the quarter.

Moving to capital allocation. Through Q2, we repurchased approximately 632,000 shares for a total of $231 million year-to-date. As of the end of the quarter, we had approximately $1.23 billion remaining on our share repurchase authorization. We continue to expect to deliver meaningful cash to shareholders in 2026 and beyond, in line with our capital allocation priorities, and we look to drive the best possible returns for our shareholders. Now turning to our updated outlook for 2026, which excludes the impact of the 53rd week.

First, U.S. same-store sales. We continue to expect our U.S. comp to be up low single digits. This contemplates the continuation of a challenging macro and competitive environment like, we have seen in the first half of the year. We continue to expect our international same-store sales growth to be up low single digits inclusive of the benefit of the World Cup soccer tournament that just concluded. We now expect approximately 175 net stores in the U.S. which is a slight shift from the 175 plus we had previously. We are making this adjustment as we are seeing some pressure on our pipeline due to the macro, coupled with the challenging start to the year, that has impacted franchisee profitability. We continue to expect approximately 800 net stores in our International business. We continue to expect our Global Retail sales growth to be up mid-single digits for the year. Lastly, we continue to expect operating income growth of mid- to high single digits, excluding the impact of foreign currency, re-franchising gains and the gain on the sale of our corporate aircraft.

Before I wrap up, I wanted to call your attention to an investor presentation that we've added to our IR website. This deck gives a summary of our business and historical growth over time across our key hungry for MORE metrics. It also includes updated market share information through December 2025 that is broken down by nationals, regionals and independents. Thank you. We will now open the line for questions.

[Operator Instructions] Your first question comes from the line of David Palmer from Evercore ISI.

Great. Thanks for those comments. Russell, if you could maybe take a step back and maybe sort of label the biggest challenges and opportunities maybe by the parts of the business as you see fit. I can think about the innovation front, the value lift front, the channel expansion. You're doing very well with carryout. There's been more like low single digits there. There was a third-party marketing lift. You had the DomOS and new versions of the app. If you had to kind of go through these areas, your own execution versus the environment, where do you think has been the biggest sort of disappointment versus plan? And how much of it is under execution? And how does that inform the biggest near- and medium-term opportunities?

Thanks, David. What I've always been proud of working here at Domino's is we turn our challenges into opportunities. And so one of the things I'm really looking forward to, I mean when you're in these jobs, all you can do is lean forward and give it everything that you can. And then there's the time to look back. And I look forward to doing that with Joe on what our strengths have been, what our opportunities are. And then in my new role helping him as he plans the vision moving forward.

So I'm not going to go through detail by detail. I will say, one of my saying throughout my career has been there's no rearview mirror in the 747. We are going forward quickly. We're going to learn. We're going to make those adjustments. And I have all the faith in the world on, with Joe and the team. I will specifically though, talk about this product that we have coming up, David. One of the things that we did here was we looked at some of the challenges within not only Domino's but within pizza. And we looked at what do consumers who are interested in pizza, what do they buy when they don't buy pizza. And that's what this new product does. It's going to hit an occasion. I don't think we, as a pizza category, hit that well today. And so that's an opportunity to really looking forward to hitting market in Q3.

Your next question comes from the line of Brian Bittner from Oppenheimer.

And Russell, as you move into this executive chair role, just a huge congratulations on such an amazing career at Domino's. And Joe, of course, congratulations on the big CEO promotion. And the question is just in light of the meaningful order count growth that you're alluding to, it begs the question, are you still seeing the short-term competitive pressures on the business that you called out specifically on the last quarter's earnings call? On this earnings call, you said that your competition has never been weaker. And I'm assuming that's more of a consistent structural view that you have. So I'm curious if you're starting to see some of those competitive pressures that you called out on the last call, start to dissipate. Or if you could just unpack that dynamic for us?

Yes. Sure, Brian. Thanks so much. It's been a pleasure to work with you as well. The competitive pressure is not only in pizza in QSR, continue through the quarter, we expect them to continue through the rest of the year. I talked about in Q1 what we saw competitively, what we anticipated for the rest of the year. And I said that we would be looking at our calendar and making changes and we have. We looked at our best deal ever, which was a renowned value promotion for us. And we made a change on that. We said, "Hey, how do we make it better. And so we added our -- one of our most delicious indulgent pizzas with Stuff crust into that. And so I think what we did was looked at what was going on in the category. And we said, you know what, everyone is leaning in we need to lean in as well.

And so you saw that with Best Deal Ever, and you're going to see that with stuff going on in Q3 and Q4. And when I talk about the competition, I'm also talking about relative to us, I've been here, as you know, 18 years. We weren't always the #1 pizza brand. And now as we are, the distance between us and our competition is greater than it's ever been. And so when I think about -- not I think, I know what wins in this category. right? It's scale because what you can do is through supply chain, offer low market basket cost to your franchisees, then you can drive volume if you have the biggest ad budget in industry, which we do and scale wind and we've never had greater scale. And relative to our competition, they've never had less scale and momentum. And so those two things add up well for us to continue to drive share as we have over the last decade plus.

Your next question comes from the line of Gregory Francfort from Guggenheim .

Thanks for the question. I just wanted to ask me about third party. Russell, I think you made a comment that you were the largest pizza player on third party now. And I guess as you think about trying to drive the business higher or continue to grow it going forward, how do you balance profitability with market share in that channel? And are you trying to hold kind of gross profit dollars similar to your in-store business? And are you willing to maybe discount a little more aggressively? Just any thoughts on continuing to drive that business going forward?

Yes. Thanks, Greg. Yes, on third party, just to be clear, we believe we're now the #1 pizza company on both Uber and DoorDash. Overall, as we've talked about, our pricing on aggregators is premium. And so we try to be kind of profit-neutral for the franchisees. So even though -- and we still think the 50% incrementality number we put out there is still the one to look at really, at the end of the day, the way we priced, the franchisees should be neutral where consumers buy that product. What I did want to talk about that I'm really excited about that actually pertains to a third party -- is something under our operational excellence pillar.

We've talked a little bit about our orchestration agent. And just to remind those on the call, what we're doing is we're setting [indiscernible] back of house optimized to make sure [indiscernible] from just-in-time pizza making that we've got the pizza right out of the oven and in the delivery driver's hands or in a consumer's hands as quickly as possible. And so what the orchestration agent does, let's say, for example, a delivery driver is stuck in traffic on his way back, an order comes in, in the past, we would have just made that order. Now the orchestration agent without the store kind of seeing, we'll say, "Hey, you know what, let's not show the store that order yet. So we don't need to make it. We need to make it so it's hot when the delivery driver gets back.

Now Greg, those orders, that's orchestration agent, that works not only for orders on Domino's website, but also orders through the aggregator. And so I think when you look at what our advantages are on aggregators, certainly, we've got the same thing that wins in every marketplace. We got brand scale, we've got value. But one of the secret ingredients for us is we deliver our product, no matter where the order comes, and it's part of this ecosystem that we're getting better and better in every day. So I think not only in the front end, are we going to be delivering great value, but that value is going to pay off on the back end because there's no one who's going to be able to deliver a hotter product than we will.

And Greg, I'm just going to add something on the profitability that we're actually seeing on the Aggregator orders. We've been very, very thoughtful about the way we're actually going after the growth opportunity. As Russell mentioned, where -- we're [indiscernible] on our fair share from a growth perspective, there's plenty of runway still for us, even though we're the #1 player. But the reason we are actually being so careful is because we want to protect profitability as we go after this growth. And that's going to be a guiding philosophy that we're going to employ as a management team as we move forward. But the runway is there. The profitable growth is there, and this is one more lever to actually drive franchisee profitability.

Your next question comes from the line of David Tarantino from Baird.

Russell and Joe, congratulations from me as well. My question is maybe on the U.S. comps performance in the second quarter, and you mentioned, I think, meaningful order count growth offset by ticket declines. I was hoping maybe you could give us a sense of the magnitude of the up and down around the order counts and the the ticket growth? I appreciate that you don't want to give the exact number, but perhaps something directionally like was it better in Q2 than Q1 on order count growth or something like that?

And then I guess, on the order count, specifically, just wondering your thoughts on what drove that specifically in the second quarter and how sustainable that might be for the second half of the year?

David, thanks for the question. And let me actually give you just a high-level overview of how the quarter worked out. From an order comp perspective, not only was it meaningful order count growth, but it actually met our expectations. -- it did exactly what we were planing do. The challenge we really we had was on ticket, as Russell mentioned in the prepared remarks, and I did too, where I think the premium series that was intended to lap the parmesan stuff crust, from last year didn't give us the results that we needed. And I think that's why we had a bit of a shortfall on ticket and same-store sales fell below our expectations. But

from what our plans are, I think this is a very sustainable opportunity from an order count growth perspective because it ties into what we're doing with renowned value, whether it's some of the promotions that we actually have had in the first half of the year or what we're running right now with [indiscernible]. And in addition to that, Aggregators will continue to be a growth driver, and that should be driving more and more occasions. So we're really confident in our ability to drive order count growth as we move into the rest of the year as well.

Yes, maybe just to add some color to that. I was putting Sandeep on the spot. I knew he wasn't going to give you the actual numbers. But it just to shed a little light, the -- when you think about the way we run our business, it's kind of like a barbell on order count and ticket. And not only were orders meaningfully up on the total business, but they also were on delivery and carryout separately. And I think it's really important. So both parts of the business are healthy. Now when that happens, you drive market share. I talked about that. I want to make sure I reiterate this point that we believe the QSR industry was flat on order counts. And so this is significant not only in absolute -- but relative to what's going on in the industry where you see a lot of folks out there trying to drive value, trying to drive orders.

And these are profitable orders that go into our loyalty program. So we've got millions of more people now as part of our loyalty program in that flywheel, and that's why our accounts are so important, and that's why they're so correlated with franchisee profitability is once we get them in the flywheel, that's what the future is all about.

On the ticket thing, David, what I'd say there is that one was under our control. If we executed the way we intended to and we rarely miss, we would have had that balance. So there's nothing within the business that I think permanently is affecting that. We're going to barbell balance ticket and order count moving forward, and that's going to continue to result in share growth.

Your next question comes from the line of Danilo Gargiulo from Bernstein.

Thank you. And again, Russell huge congratulations on the incredible success at Domino's, the big impact you had, all your career and congratulation and good luck to you Joe, on your new role. I guess my question is, obviously, you tested a new premium series before opening up to the market and it fell short of your expectations. So I'm wondering if you can elaborate on what drove the disconnect between your testing and the actual results? And what learnings are you embedding to make sure that the new pizza that you're going to be launching later this quarter is not going to fall short of your expectations?

Yes. Thanks, Danilo. We've been, as you said, pretty good, at least over the last 18 years that I've been here in what I call is having the answers to the test, before we go into the test -- whether it's pricing or new products, doing a really good job at understanding the impact of what we do. Clearly, we missed on this one. It wasn't compelling enough. I think I said in my opening remarks that I really felt like our messaging is back to where it needs to be. And that is not only for what's on air now, but for what's going on with this new product coming up. So stay tuned. We're very, very excited, and I can't wait for you to try it.

Your next question comes from the line of Dennis Geiger from UBS.

Great. Congrats Russell and Joe. I wanted to ask another one on the order count and mix dynamic. Specific to the order count, Russell, you commented on adding millions of new customers. I'm curious if there's any way to put that into context relative to prior quarters and presumably some of that's a good chunk is coming from the third party channel. Anywhere else where you think those new customers are coming from? And then just as it relates to the mix side of that. Just curious, as you think about Best Deal Ever with stuff there. Is that something that has a notable drag on mix? Or have you kind of engineered or figured it out that it's not notable ticket drag?

So Dennis, I'll start and maybe Russell will tag team on this one as well. I think on the order count front, it's really a consequence of all the great stuff we have talked about during the Investor Day, when you think about the loyalty program that we launched just before Investor Day. We have continued to build significant numbers into the loyalty program. And as of the end of '25, we were up 20% from what we were before launching it. And I think we're really excited about the frequency bills that come behind customers acquired through the loyalty program, and that is a big driver of our order count. And that's on the one hand.

On the other hand, the other we talked about on the Investor Day was entering into the Aggregator channel. And the beautiful thing with 50% incrementality is we are acquiring more customers that we wouldn't have been able to acquire otherwise by being on the aggregator channel, and this continues to build, and this also continues to compound over time as we spend more time on platform. We're seeing this in the case of Uber, and we expect to see this in the case of DoorDash over time as well. And that's why we're so bullish on the future with the Aggregator platform as we move forward.

And then I think on the mix dynamics, we touched on this a little bit in the prepared remarks as well, where, yes, we did have an impact on -- ticket during the second quarter because the Premium Series didn't give us the mix that we were looking for. But as we also noted, as we moved into the third quarter of last year, a few weeks into it, the messaging changed from Parmesan Stuff Crust to our next promotion, which happened to be Best Deal Ever. And now we're actually lapping best deal ever with Best Deal Ever. And we're super excited about the reinvention that we've done, with the inclusion of Parmesan Stuff Crust in the best deal ever offer. And really excited and confident that this is going to be an important old account driver in addition to the fact that the mix impact from the ticket is much more modest in Q3 because we pretty much have already lapped that.

And I also think about this as almost -- we use this term paid trial by putting parmesan stuff crust in Best Deal Ever, yes, it's a discount for customers, but they're still paying a good fee for it. And that trial will lead to long-term repeat. So putting Stuff Crust in Best Deal Ever was really important because we know when people try it, they'll come back again and again. And so that's happening right now with best deal ever.

Your next question comes from the line of Lauren Silberman from Deutsche Bank.

Congrats Russell and Joe. I guess, first, I just want to clarify my question, the clarifications on same-store sales. Is it fair to assume 2Q comps are the lowest for the year, just given the comments that average check should get better and sounds like momentum in the order count continues? And then my actual question is just on U.S. unit growth. So trimmed it slightly, you called out franchisee profitability. I know a lot of [indiscernible] would have been in place in '26. So I guess what does that mean for '27? And just given pizza industry pressures, is this a little bit of rebalancing across same-store sales and unit growth, anything you'd consider differently to sort of incentivize unit growth?

So Lauren, let me start with the same-store sales projections. And look, I mean, we didn't change the guidance for the full year from up low-single-digits. And I think we're sticking to that. And I think based on how we updated last quarter, we weren't really going to talk to our cadence during the course of the year, where we're happy with the order count growth in the second quarter, but not happy with the ticket outcome that we got. And -- and I think as we move into the back half of the year, we're looking to fix both sides of it. And so we're very confident in our guide of up low-single-digits. So when it comes to the unit growth, and I think we touched on that specifically, and you did catch that we made a modification to it.

When we actually have looked at the last few months and some of the headwinds that we've been seeing broadly in the environment, the pipeline has started to see some pressure. And I think this happens -- sometimes and there's a bit of pressure on franchisee profitability. And so while order counts have been great, unfortunately, in the short term, when we don't execute both sides our barbell strategy, with the ticket actually not achieving the objectives that it was intended to achieve that had a short-term impact on franchisee profitability. We know exactly what the problem is. We're fixing it in the back half of the year. So we're pretty confident that we actually get back on track over time. But I think in the short term, because of the window that we're in -- halfway through the year, we are seeing a little bit of that pressure, which we are sure will actually take care of itself over time. Too early to talk about 2027. We'll run back once we do our budgets for the year, by the end of the year, and we'll talk about it more when.

Yes, I think I'd be remiss on my last call not to address the second part of your question, which is pizza industry pressures. I -- that one I did, I'd love to put into context. Again, for as long as I've been here, the pizza industry has grown 1% to 2%. We can continue to take share. And I guess, rather just reiterate that statement, I take a step back and say, certainly, is this -- is pizza a mature category? Yes, is our sandwiches and burgers mature categories? Also, yes. And I think pizza did relatively well to both of those categories last year.

The difference between pizza and the leaders in the categories is we have about half the share that's a leader in burger has of their category. So I think the proof is in the pudding. And if the category continues to grow the way it has, the upside from us -- for us just to get what the #1 share should be of a category that grows pretty similar to those other categories, there's a lot of upside for us, and it's upside that we've shown we've hit over the last decade plus.

Your next question comes from the line of John Ivankoe from JPMorgan.

First to comment and obviously, I don't know if it's the product, but the Italiano that you have in the U.K. is my single favorite large brand pizza I've ever had. So we have an opportunity to bring that to the U.S., I'll be very happy about it. So just -- just a comment on that. Hopefully, it landed okay.

And then secondly, when I do think about unit development, obviously, to recall Lauren's question but asking it in a different way. A little bit of it tweaked down in '26, it does seem like at least from what I'm interpreting '27 has an opportunity to perhaps be a little bit less. My experience is that one of the easiest ways really to drive same unit economics is to focus on what's already open as opposed to what would open in the future. And Domino's as a brand in the U.S. has closed nearly nothing in the past in my experience covering the company since 2004 has closed nearly nothing. So do we have an opportunity to maybe remap some of the U.S. and just kind of think, okay, what's the best way to optimize same-unit profitability and not just maybe rethink of what was previously planned to open, but maybe in some case, actually consolidate some stores that perhaps we could have over split certain markets in order to enhance same unit profitability? So how are we thinking about kind of remapping U.S. businesses. I think we have an opportunity and maybe [indiscernible] things.

And if we could get it to you in 30 minutes over the pond, we would, but even the new orchestration agent can't do that. But I agree, it's a very, very good product. What I'd say is the -- I'm not sure I agree with the thesis that we should be remapping our stores. What we did this last quarter and the last couple of quarters is we grew order count. Growing order count leads to more store growth. And so as you said, there has not -- I think we have like 6, 7 stores closed in the last couple of years in the U.S. And so there's really no need to redraw anything. I think there's a need -- there's an ability to open up more stores and more stores get driven by more orders. So what you've seen here in the quarter, franchisee profitability is the other piece of it. But more quarter -- more orders that's key to future store growth. And so I'm bullish at that part, that outcome in the quarter and its effect on long-term store growth.

And I was going to add on this, John, I think Russell said this many times before in previous calls and so have I. When we open up a store, the carryout business is about 80% incremental. And with the scale that we've actually already achieved, we have tremendous opportunity to drive incremental growth with our share just about 20% on carryout. So it continues to be a very compelling vehicle for growth for us and does offer great returns for the franchisees when they open those stores.

Your next question comes from the line of Zack Fadem from Wells Fargo.

Congrats Russell, Joe, following up on innovation, as Domino's has a history of implementing or testing new products overseas and then bringing them to the U.S. So my first question is if you can update us on what products you have tested internationally of late? And any thoughts on results, chicken dippers, et cetera. And then with respect to your pizza innovation, is this something that's been tested over season? Is there anything that you can share about performance?

Zack, yes, the chicken dip has been launched by DPG, Domino's Pizza Group. And they reported in Q1, they were very happy with the launch. We're not going to get ahead of reporting their results. I'll go ahead and let them do that. But I would remind everyone that through kind of the -- what is currently in a Domino's store currently the ovens and all that. So if they're excited, we are certainly excited. And we look at our products internationally all the time, the Lava Cake that we launched years ago came from international.

This particular product the team developed here in the U.S., and we're excited at [ launching ] it because I actually believe that this is an occasion that can help pizza potentially expand a little bit more outside of pizza because of the occasion that it hits. And if it works here, hopefully, this is something we can bring abroad. So tune in for that.

Your next question comes from the line of Sarah Senatore from Bank of America.

I wanted to follow up on the comment about your share of the market being half what it is -- and other segments. But I guess the independent -- independent seem to be maybe more formidable challengers in this segment than elsewhere. And you mentioned dine-in channel in particular, this now seems to be driving growth. I guess, one, I would have thought that this normalization from COVID might have happened already. So if you can give some insight into maybe where Dine-in is, as a share of channel and whether that's different from historical? And then two, as you think about kind of competing with independents, is that something that you -- concerned you? In terms of like going forward if, in fact, they seem to be on the upswing.

Thanks, Sarah. Yes, I'm just excited that we had another quarter and year-to-date where the pizza category grew, and as we said, we grew order counts. And so we're happy when both of those things happen. The -- what we did call out in our opening remarks was that Dine-in Pizza was -- saw some positive momentum. When I look back over the years, what you see for a quarter or for half a year, it's really important to step back at the end of the year and take a look. If you remember last year, the pizza category started out, it was a little bit rough and folks wondered, hey, you're going to hit the 1% to 2%, and we did. And so we're open to all growth in the pizza category. Dine-in is obviously something that we don't compete in directly, but more people coming into pizza is only helpful for us, especially while we continue to grow order counts.

And Sarah, I want to add something on that. I think as I mentioned in the prepared remarks, we posted an investor deck on the IR website. And if you go back there, we've got two pieces over there. We've got one piece, which actually gives a retrospective to what we shared back in December 23 at our Analyst Day where we've gained 9 points of share over 8 years, 3 of those 9 points came from independents. So we can actually take share from independents. And essentially, when you look at things, just like Russell said, you don't look at a quarter or maybe 6 months. You don't look at things even in a very short time frame of years, you look at it over a longer period of time. We have done it before. We can do it again. And I think that's the way we focus on all our competition and one of the best ways [indiscernible] away from them.

Your next question comes from the line of Andrew Charles from TD Cowen.

Great. And Russell and Joe, I just wanted to say my congratulations as well. I want to reconcile your thoughts on the U.S. business. You talked about strength in the Aggregator business in 2Q. And I know you've said earlier in this call, the thesis for getting into it is around the premium pricing as you don't offer the $6.99 mixing match. But I'm curious if part of 2Q's ticket mix can be explained by the value offers being offered in recent months on both Uber and DoorDash, which just $3 medium pizza among other value offers here to help attract more guests?

Yes, Andrew, thanks. No, the ticket miss, at least versus our plan was -- can be explained by the Premium Series.

Your next question comes from the line of Chris Carril from KeyBanc Capital Markets.

Russell and Joe, congratulations on your new roles here going forward. So I did want to ask about the International business. I was hoping you could expand a little bit more on that beyond what you've already said today. Maybe areas or geographies that were perhaps a drag in the 2Q, where there might be opportunities for improvement and also where you saw strength? And Sandeep, I know you mentioned World Cup benefit or at least World Cup as part of your guide for the year. Curious if that was a 3Q specific comment. So any clarification there would be great.

Sandeep, you want to start with the World Cup and then I'll take it from there.

Yes. I'll start with World Cup, and I'll probably give a little bit of color on the comp as well. So look, in terms of the World Cup, it's really started after June -- for the most part, after June 14, which was the end of our quarter. So there was really a full year comment on the guidance and what it included. We always included it, but we wanted to make sure that we clarified it on this particular guidance messaging.

So but in terms of the performance that we had in the quarter, there was -- there's obviously lots of puts and takes when we get to the final comp that we had. And we're really not going to get into too much specifics on geographical variation. What I will say is -- two things actually impacted us. The macroeconomic and geopolitical environment was definitely an overhang that we anticipated and we experienced. And as I called out in the prepared remarks, Domino's Pizza Enterprises was definitely a drag on our same-store sales because their performance continues to be impacted by the approach that their management have already talked about, which is they've actively decided to actually reduce the lower-margin transactions. And as a result of that, we've actually had a reduction in order counts where the ticket increase has not been able to compensate it, and that same-store sales drag that they've experienced impacts us pretty material. And that's the other driver that I'll say is embedded in the numbers.

Yes, just maybe on the DPE comment, their new CEO, Andrew Gregory, is going to be starting in August. And we're really looking forward to working with Andrew. He's got 30 years in the restaurant business, a majority of those with McDonald's. And what we're going to be focusing on is, like Sandeep said, there's been an initial kind of reboot on the profit side at the expense of orders. We think -- I think they think as well -- now we need to go in with the right kind of value to recapture order counts. It's important for folks to remember that with Domino's Pizza Enterprises, yes, there are some struggles going on right now, and some of them are purposeful, resetting kind of the profit piece here. But they are the #1 pizza player in the majority of their markets. And so they are coming back from a position of strength. And I think that's super important to understand. Also, just shouts out to China and India that does continue over time being standouts for us.

Your next question comes from the line of John Tower from Citi.

Maybe just going back to the new product that might be on its way in the third quarter here or is on its way. I was just curious if you could kind of try to read through the tea leach here. Russell, you had mentioned that this is effectively a new occasion for Domino's. And while also protecting the core pizza occasions and I think about your business, and you guys hit really well at nighttime, maybe not day time, particularly around lunch. So seems to lean in the direction of something around that lunch occasion, maybe even more single-serve. So if that's the case, how should we think about protecting the aggregate ticket, if you're moving in the direction of, say, single-serve occasions here or something more geared towards smaller portions?

Yes. Thanks, Jon. I would definitely think about this a little bit different. Stuff Crust for us was a part of the category we didn't participate in. I think this is an occasion that pizza doesn't participate as well in. We're not going to go into -- pretty good hypotheses so we can check on the next call. I think the key for also is that this is an incremental occasion, we believe there's a lot of incrementality to this. And so even in the case if there were pressures one way or the other on ticket, you're also bringing in new customers as well. And so we're going to look at that balance overall. If we can bring in more customers, as I said before, more customers lead to more profits, more profits and more customers lead to more stores, we're doing the right thing. And this was really looked at after understanding what do customers who think about pizza, but order something else? What do they order? And how through pizza can we address that?

Your final question comes from the line of Jacob Aiken-Phillips.

Congrats to both Russell and Joe. So you -- you described the order growth is profitable, and I understand the ticket mix, but you also cited franchisee profitability as one of the constraints to the development pipeline. Can you give us any color or direction on where franchisee profitability is trending this year versus the 166,000 you have in slides for 2025? And then maybe break apart like what other things are pressuring it the most and what needs to improve for those openings to reaccelerate?

So Jacob, I think on this one, as we look in the first half of the year, and we definitely saw the order count growth that we were looking to have. But I think especially on the second quarter, we talked about the Premium Series not mixing to the extent that we were planning on and that has a negative impact on franchisee profitability. So part of what happened was a discrete event in the second quarter that actually impacted franchisee profitability due to the ticket drag that we talked about.

Now we are fully cognizant of it. We know what we need to do. We need to go and fix it, and we are fixing it, and that's all embedded in our plans. But I think on a short-term basis, there was that impact in the second quarter, but in no way should this be an impact to long-term franchisee profitability. The whole point that Russell was making on the prepared remarks is, if you look at the long-term relationships between franchisee profitability and what drives it, it is driving order count, customer acquisition, building frequency behind it, but doing it with healthy ticket with disciplined pricing. So if you are in balance over time across all these elements, you're going to drive franchisee profitability. We had a 1 quarter blip on ticket. We're not going to have another blip.

Thank you, Jacob. That was our last question of the call. We want to apologize for the technical issues we experienced this morning that were the result of our third-party conference call provider. We very much appreciate your patience and flexibility as we work through that. We look forward to speaking with you all again soon. You may now disconnect.

Good day, and thank you for standing by. Welcome to the First Quarter 2026 Domino's Pizza Earnings Conference Call. [Operator Instructions] 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 Lemenchick, Vice President of Investor Relations and Sustainability. Please go ahead.

Good morning, everyone. Thank you for joining us today for our first quarter conference call. Today's call will begin with our Chief Executive Officer, Russell Weiner; followed by our Chief Financial Officer, Sandeep Reddy. The call will conclude with a Q&A session.

The forward-looking statements in this morning's earnings release and 10-Q, 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 forecast. 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 1 question only. With that, I'd like to turn the call over to Russell.

Thanks, Greg, and good morning, everybody. Q1 represented another quarter of positive order count and market share growth for Domino's in the U.S. While I was pleased with our start to the year, performance for the rest of the quarter did not meet our expectations, resulting in same-store sales of 0.9%. We are very clear on the drivers of our results, and we'll do everything within our control to address them by adjusting our plans in the second half of the year.

Looking back at Q1, pressure intensified throughout the quarter, in particular, in March because of growing consumer uncertainty. Consumer sentiment hit COVID level lows and ongoing inflation continued to impact purchase decisions. Weather also affected our business in the quarter, including the beginning of our carryout special boost week.

Competition within the QSR pizza space also increased in Q1 as the national pizza players offer deals comparable, if not identical, to the renowned value Domino's has made famous. While this created some short-term pressure, we believe Domino's wins in the sustained value environment. Our advantage is profit power, the ability to offer compelling ongoing value while driving profit growth for Domino's franchisees.

Our industry-leading advertising budget drives the order counts needed to make this value model work profitably over time. Our pizza competitors simply don't have that same capability. As a result, we believe that when competitors match our value, it places significant pressure on their franchisee economics. Over time, we expect this pressure to contribute to more store closures on top of the roughly 450 closures our 2 public pizza competitors have already announced for 2026. I believe these dynamics will translate into more sales, more stores and more profits for Domino's franchisees.

In Q1, we continued to make strong progress on our Hungry for MORE strategy. I want to call out a couple of areas, particularly within the operational excellence pillar that we believe will play a major role in driving our future success. We fully launched our new app, including improvements to our world famous pizza tracker, which has tracked more than 2.5 billion orders since 2008. This new modernized app is much easier for our customers to use and will allow for more personalization over time. And the updated tracker provides more precise ready time based on new AI technology, live activities for iOS users and a more detailed view of each orders progress. The closer we can deliver our products to the time we promise our customers, the more they come back in the future. The updated tracker helps us do just that.

In addition to the consumer-facing app, we made progress in our back-of-house DomOS orchestration agent that makes production more efficient and effective. This orchestration agent allows in order to be prepared hot and fresh for our customers in the most efficient way possible. For example, if there's not going to be a driver back in time to pick up a pizza when it exits the oven, this technology can alert a store to hold that order so it isn't made until a driver is there. Our goal at the end of the day is just in-time pizza making, which will result in a more consistent, higher-quality product for our customers.

As I finish up, I want to highlight why I remain so bullish on our business now and in the long term. On our February earnings call, I shared my view on the QSR pizza category growth and my confidence that we can outperform the competition and capture meaningful market share in 2026 and beyond. That view remains unchanged.

I'll start with 2026. We are committed to doing everything we can to deliver 3% same-store sales in the U.S. for the year. While I already addressed why we believe we missed our plan in Q1, those were reasons, not excuses. Our team is hard at work making the adjustments we believe are necessary to drive an even bigger impact in the current macro environment. I'm especially energized by the product innovation we're bringing in the second half of the year, particularly around pizza, which goes beyond what we originally planned. It's bold, exciting and has real potential to elevate our brand.

Now to my belief in the long term, which is as strong as it has ever been. You've heard me talk about how we've taken 11 points of market share over the past 11 years in the U.S., let's go a little bit deeper, let me tell you how we gained that market share. We did it by driving more sales, more stores and more profits. First, sales. Our same-store sales have grown on average more than 5% annually over that time period. Next, stores. We've opened more than 2,000 net new stores over the last 11 years amidst a backdrop of significant competitive closures. And finally, profits. Our average franchisee has increased profits almost $80,000 per store. This means the Domino's franchise system is earning $740 million more in profits than it did just 11 years ago. This has been and will remain our formula for success. More sales, more stores and more profits drive more market share, more market share, drive scale, which strengthens our competitive advantage. That is the Domino's effect, working for over a decade, delivered again in Q1 and one we expect to continue well into the future.

I'll now hand the call over to Sandeep.

Thank you, Russell, and good morning, everyone. Income from operations increased 4.2% in Q1, excluding the impact of foreign currency and a gain on the sale of the company's corporate aircraft. This increase, which came in below our expectations, was primarily driven by higher U.S. and international franchise royalties and fees as well as gross margin dollar growth within supply chain. Excluding the impact of foreign currency, global retail sales grew 3.4% in the quarter due to positive U.S. comps and global net store growth of more than 900 stores over the past 12 months.

In Q1, retail sales grew by 2.8% in the U.S., driven by same-store sales and net store growth. The U.S. QSR pizza category grew again in the quarter, and we continue to take share.

Same-store sales grew 0.9% for the quarter, driven by our marketing promotions and continued growth in our aggregator business. Our business was impacted by a challenging macro environment, which continues to pressure consumers as well as increased competitive activity. Our comp was driven by a balance of positive order counts and a positive average ticket. Ticket benefited from 0.9% of pricing, partially offset by a negative mix impact. Our carryout comps were up 2.4% and delivery was down 0.3%.

Shifting to U.S. unit count. We added 19 net new stores, bringing our U.S. system store count to more than 7,200. International retail sales grew 4%, excluding the impact of foreign currency in the quarter. This was driven by net store growth over the last year, inclusive of 161 stores in Q1 that was slightly offset by same-store sales decline of 0.4%. Excluding the headwind on our comp sales from Domino's Pizza Enterprises in the quarter, we would have met our expectations.

Moving to capital allocation. Through April 21, we repurchased approximately 446,000 shares for a total of $170 million year-to-date in fiscal 2026. As of April 21, we had approximately $1.29 billion remaining on our share repurchase authorization. This is inclusive of the additional $1 billion share repurchase authorization that the board approved in April.

I wanted to take some time to remind everyone of the incredible profit and cash flow generation of our earnings model. If you go back to 2015, Domino's generated approximately $400 million in operating income and approximately $230 million in free cash flow. In 2025, that grew to approximately $950 million and $670 million, respectively. Over the same time period, we have returned approximately $7.7 billion to shareholders through share repurchases and a dividend that has grown annually by more than 20% on average. We have done all of this while maintaining a leverage ratio in our expected range of 4 to 6x.

We expect to deliver meaningful cash to shareholders in 2026 and beyond, in line with our capital allocation priorities, and will look to drive the best possible returns for our shareholders as we evaluate our options.

Now turning to our updated outlook for 2026, which excludes the impact of the 53rd week. First, U.S. same-store sales. As a result of the challenging start to the year and increased macro pressure, we now expect our U.S. comp to be up low single digits in 2026. As Russell noted, we're actively optimizing our marketing calendar to meet the moment and ensure we're well positioned despite the current macro environment. Second, we now expect our international same-store sales growth to be low single digits, primarily as a result of the macro and geopolitical uncertainty across the world. Third, we continue to expect 175 plus net stores in the U.S. and approximately 800 net stores in our international business.

As a result of our revised same-store sales outlook, we now believe our global retail sales growth will be up mid-single digits for the year. Due to our lower sales expectations, we now expect operating income growth of mid- to high single digits, excluding the impact of foreign currency, refranchising gains and the gain on the sale of our corporate aircraft.

As I close, I want to be clear that our team is fully aligned and working with urgency to deliver our 2026 outlook and that our belief in the long-term algorithm of the Domino's business through 2028 has not changed. Thank you. We will now open the line for questions.

[Operator Instructions] And our first question comes from David Tarantino with Baird.

Russell, I just wanted to ask your thoughts on the comps outlook for the remainder of the year. It looks like you're guiding to continued positive comps even though the comparisons look like they get quite a bit more difficult. So I'm just wondering if maybe you can unpack why you think the business might be able to accelerate on an underlying basis? And I know you mentioned some innovation that's coming and adjustments to your plans. And maybe as part of the adjustments, does that mean perhaps a bit more focus on value? Or I guess, what -- if you could elaborate on that, that would be great.

Thanks, David. I'd like to say, even though Sandeep talked about a revised guidance, my objective, his objective, everyone at our company, our objective continues to be for the year in the U.S. 3% same-store sales. And we had a pretty light first quarter last year and folks asked whether or not we thought we could hit 3% for the year, and we did, and that remains our focus, that remains our objective. You're right, though, we have absolutely looked at our calendar and asked ourselves within what we can control, how do we change things? How do we see what out there in the environment? And it's not just value, I think we can do a little bit more on pizza innovation as well. And so starting as soon as May you're going to see things on the calendar or in media from Domino's that weren't on our calendar to start the year.

So our plans moving forward will look very different than they were starting the year, and that's because we adapt to what's going on in the broader environment.

And David, I'm just going to add on the guidance specifically on positive low single digits. I want to emphasize the positive. I think we're really confident that even with the macro environment and the volatility that we see in the macro environment, with all the leading in that Russell just talked about, we are still confident of driving positive low single digits. That's point number one. Point number 2 is, we're still growing stores. We are expecting 175 stores. We grew 172 stores last year as well. And we are expecting to drive retail sales growth definitely well above the same-store sales growth that we're talking about, continuing to drive market share growth in a category that we believe will continue to grow.

Our next question comes from Greg Francfort with Guggenheim.

I just want -- maybe just wanted to follow up on that. And Russell, anything you're seeing competitively in the environment right now that maybe as your competitors are acting a little bit more rationally or anything you can see from that front? And then do you expect with your competitors maybe closing stores later this year? Is that something you could see from an [indiscernible] basis?

Thanks, Greg. On the competitive side, I think what they're doing is they're seeing what has made Domino's successful. And if you look at Q1, one of the things I talked about in my opening remarks is a lot of the promotions they had there were really out of our playbook, kind of their version of best deal lever, our mix and matches, and to that, we say bring it on because we're built to do that stuff over time. Now you add that to some of the macros, and was that a little bit of a headwind for us in Q1, yes. But I think it really delves really well into your second point, which is the closures that they've already announced for the year.

Greg, I know the kind of volumes that need to be done in order to make deals like the ones we have out there profitable. And I do not believe that our competition can drive those kinds of volumes because their advertising budget, ours is as big as the biggest 2 competitors combined, just can't do that. And so believe me, I was not pleased with our results for the quarter. But I do think that there was potentially a little bit more structural damage behind the scenes. And you'll see that, I think, in future quarters and future years coming up in store closures and then in kind of lighter franchise profits for our competitors.

And Greg, what I'll add is, Russell talked about the 450 stores that are national competitors that are publicly traded or have quoted. But really speaking, if I go back into '25, they closed about the same number of stores last year too. So our playbook has been to continue to squeeze their profits, they close stores, we take sales, we take share. What is happening in '26 is no different. It's a continuation of the same play and that continuation of the same play should continue well beyond '26. And that's why I think what Russell said on the profit power is super critical. We are able to actually continue to drive this playbook forward.

Our next question comes from David Palmer with Evercore ISI.

I just want to present maybe a common investor view and push back, and that is that it's not a pushback that Domino's will gain share in the pizza category and especially from the near-end big 3 players. It's really that Domino's operates in the pizza category and that you've talked about 1% to 2% growth for that category in the past, and that, with your share gains, which I think people can believe in, will get you to that 3% comp growth while growing units. So the concerns about the pizza category in light of the fact that other categories are more available on in delivery channels now, and I guess the concern is that maybe 3% is not appropriate in light of that, even though your long-term delivery has been strong and, in fact, better than 3%, the concern is that the reality is different today.

Could you just speak to any of that and how it informs your strategy?

Thanks a lot, David, for the question. I've been here, this is my 18th year at Domino's, and I feel like every year when I get in front of our team and I talk about category growth, it's 1% to 2%. And we've talked -- if you remember last quarter, I had a lot of questions -- I'm sorry, first quarter last year, a lot of questions about the pizza category, which got off to a slow start last year, but guess what, ended up at 1% to 2% for the year. And so this is a trend that has been pretty consistent, and we just don't see falling off. And maybe just getting to your delivery question, I'd answer it in a little bit different way.

Look, delivery, certainly other folks are getting into this game have gotten into this game. But you've got to remember, we're now -- we've changed our strategy, and we're on the aggregators. And essentially, this last quarter, on delivery, we held serve on total delivery. That is something, in the past, domino's would not have done because of the structure of our consumers. And what we talk about a lot is lower income consumers, which we have a QSR pizza and Domino's have a good amount of those customers, when it comes to delivery, when times are tight, what happens is we don't lose those customers, we may lose an occasion, those people come back.

And so this quarter, with all the headwinds out there with consumer confidence being low, this normally would have been a quarter where we took our total delivery business that I think even a bigger hit. But the fact is us being on aggregators with a higher-income customer, the incrementality of that, our full delivery strategy results are probably a little different than they would have been in the past. And I'd point to as well is this carryout business that just continues to grow for us, it's a bigger portion of the pizza category, bigger portion of the QSR category, and we can continue to grow that in addition to opening up all those new stores, which helps us with carryout as well. And so David, net-net, history hasn't changed. We're a couple of months -- a few months into a year. And I'm really bullish about our ability to grow in a category that can continue to grow.

And I'm just going to dimensionalize some of the numbers that Russell talked about. I think the delivery category in QSR pizza is a $17 billion category, of which the aggregator business is, call it, $5 billion roughly. And -- but now to Russell's point, we're playing in both the 1P as well as the aggregated piece, which is why we were able to actually drive the kind of results that we were able to drive in Q1 despite a very tough environment. But the really important thing over here is we have a 33% share in the delivery business today. But if I actually look at the carryout business, the carryout category size is $21 billion. That's about half of all of QSR pizza. Our share there is just 20%. We have significant runway of growth on the carryout business that we can actually tap into. And I think that's the exciting part about the strategy. And it goes back to what we talked about at our Investor Day in 2023. The aggregators was certainly a very important piece of it, but is significantly underpenetrated in carryout and that's a big part of how we actually look at the 3% same-store sales growth objective we have.

Our next question comes from Brian Bittner

Bittner with Oppenheimer.

So you talked a lot in your prepared remarks about some of the sources of pressure you experienced in the first quarter, and the first quarter was something in that 300-basis-point trend change from where you were in the fourth quarter. But you also said in the first quarter that you did take market share and that the industry remained in solid shape, the QSR pizza category. So when you look at that trend change that occurred for Domino's comps in 1Q, was it more driven by taking less share than you've been taking? Or did the QSR pizza category see some type of trend change for the entire industry? Can you just kind of maybe unpack the current trends we're seeing in the business right now versus where we were?

So Brian, I think when we look at Q1, there was a lot of noise in Q1. And I think we talked about some of the weather issues that we had earlier in the quarter. But then starting in March, we saw a significant macro and competitive pressures weigh on the business as well. Through all that noise, we still saw the QSR pizza category grow. And through that noise, we actually grew faster than the pizza category. And we did take share to the point that we made in the prepared remarks.

What I think is important to note is Russell talked about the fact that competitive activity is stepping up did have a short-term impact in the quarter. But in the long term, we believe that the competition is not going to be able to drive the profitability they need to sustain that. So we look at share really on a much longer-term basis. And on a longer-term basis, we've continued to gain significant share. And even in a quarter that was a bit tough for us in Q1, we gained share. So we feel really good about what the long term holds for us, and we'll keep on running the play we are.

Our next question comes from John Ivankoe with JPMorgan.

I'm interested to hear that some of your previously unplanned innovation is around pizza. And certainly, I'll be very curious to see what type of pizza innovation that you can do at this time. That's the first point. Secondly, there are significantly growing categories around premium chicken and also sandwiches. Your operating platform does permit both of those. So to what extent is there an opportunity for you to extend both in terms of your capability of your stores and your supply chain into some non-pizza categories, which are actually quite large like premium chicken and sandwiches?

Yes. Thanks, John. We've got a multiyear product innovation strategy and funnel. And so what we're able to do in times like this is to say, okay, what's going on in macro, and what can we do to inflect any kind of negative externalities that we're seeing right now. And I think we're going to do that with some of this pizza innovation. And this is stuff that's either moved up in the calendar this year or didn't even exist on our calendar before that got started. And as I said, I'm really excited about those. And I guess you'll have to just wait and see, but I promise you, you will be as well.

You're right about the overall product portfolio we've got. Of 40-plus percent of what we sell is not pizza. One of the first things I did actually when I was at the company in 2008, we launched sandwiches. And so we've had sandwiches well back for a very long time. We've got a wide variety of chicken products. As you know, we're also globally testing something called Chicken Dip in the U.K. And so far, DPT is very excited about the performance of that. And so product innovation pipeline is something that is very robust here. We do think what we've got right now with our pizza oven, all of our products can go through that, and we can make the most delicious food there. But obviously, things are on the table if needed, but that's where our focus is.

Our next question comes from Peter Saleh with BTIG.

Great. Maybe I just want to come back to the health of the consumer in 1Q. Can you maybe talk a little bit about that performance by income cohort as you've talked about it in the past? And just curious if you think the shortfall this quarter was really due to the competitive pressure in pizza, which might be a little bit more transitory? Or do you feel like this was an overall QSR kind of pressure in the quarter?

Yes. The -- when we look at the consumer this quarter, the kind of the uncertainty there when you look at the surveys or kind of at COVID level lows, and that is particularly magnified when you look at the lower income customer. And so I do -- pretty confident both in pizza and QSR. You're going to see pressures there. And that's why not only in pizza but in the rest of QSR, you saw a lot of value out there. Companies are going to give consumers what they're looking for. And so clearly, they're looking for that, and that's why the competition is leaning in on value.

The thing I'd say about the quarter, certainly wasn't the quarter that we had initially expected. But if you look at the composition of our 0.9%, a couple of things. One is from a retail sales point, and maybe this gets to Brian's question a little bit beforehand, we're up 2.8%. And so when we grow, it's not just in same-store sales, it's total source -- I'm sorry, it's total retail sales. And then when you look even beyond the composition of the same-store -- within the composition of same-store sales, and you look at every income cohort for us, and I don't think this is going to be the same for the rest of the QSR, we grew, including in the lower income cohort. So there are definitely some bright spots when you think about what the rest of the year has in store for a pressured customer.

Our next question comes from Chris O'Cull with Stifel Financial Group.

Russell, you mentioned that you expect competitors to close additional stores. Just wondering if the company has a sense of the sales lift franchisees are getting in markets where competitors stores have already closed. And are there certain geographies where you're seeing more closures by the competitive set?

Thanks, Chris. Yes. No, certainly, we're seeing a lift when there are closures. A couple of things. One is, I think in general, we expect to see our fair share, so you take our share of piece of sales in that area. That's kind of what we expect to see when they close. Now the thing to remember is these closures happen because of business pressures over time. So when the stores close, they're not million-dollar stores in AUV, they're probably close to half of that. So while the flow-through continues to come at those levels, it happened, and the attrition happens over time. What I was trying to say before is, I think the attrition will continue. So whether it's in store closures or just in less sales that lead to less profits that lead to eventual closures, this is something we've been doing for a long time. And I think it's just proof that this strategy is working.

11 years, 11 points of market share, and 11 points of market share in a category that's growing. This was not a increase in a declining category. This was sales averaging more than 5% annually over those 11 years, 2,000 new stores over those 11 years, and franchisee profits increasing over those 11 years, and that's why we're so bullish on the future. I mean, last year, Q2, Q3, Q4 were all really strong quarters. Q1 wasn't where we thought it would be, but that doesn't mean it's a predictor of the future. The predictor of the future is what we've done in the past, what we have and will have on the calendar and our ability economically with our franchisees to continue to push within a category that we expect to still grow, gain that market share and continue to gain sales. It's not at all something that should not continue.

Our next question comes from Dennis Geiger with UBS.

I wanted to ask another on value and value positioning and sort of a little more on what you've seen maybe from some of the recent promos. But more importantly, as you think about competition from the large pizza brands, maybe even from C-store and then the non-pizza QSR players that you kind of touched on, do you feel over the near term that you've got to do even more on the discounting front or more generous offers? Or do you do you weight out the competitive intensity, I guess, as you touched on the fact that it's not sustainable longer term? Just curious on that front, how you approach it over the coming quarters or so?

Yes. Thanks, Dennis. When I think of competitive intensity, I think of us as the driver of competitive intensity. Renowned value is one of the core pillars of our Hungry for MORE strategy as well as the E, which is our -- everything we do is enhanced by our franchisees. So we drive renowned value and still drive profit, and profits were up last year. with our franchisees. So I think on this one, we're actually the ones in the lead. We're the ones that can drive profitable volume growth through this and other folks that are kind of trying to follow that lead, certainly, in the short term, they may keep more of their customers. But in the long term, I think this makes it more difficult for them to compete more difficult for them to have those franchisee conversations about promoting the next offer. So we can continue this well on into the future in a way that gives consumers what they're looking for, and gives our franchisees what they deserve, which is profit growth.

Our next question comes from Lauren Silberman with Deutsche Bank.

Just a level set of on, I guess, what are you defining as low single digit to the 0% to 3%? And then my actual question is just on the gas prices, obviously, we've seen a big increase. How does that impact Domino's across a few different fronts? If you can comment on U.S. and international, maybe, one, on consumer demand; two, and just the impact on the supply of delivery drivers, and then any thoughts on the commodity cost outlook?

Maybe I'll take the gas prices one, maybe you can talk a little bit about guidance. Thanks for the question, Lauren. The gas prices right now, what we're seeing there is really more of the impact on consumer disposable income. And as long as that continues, I think that will continue to be a driver of both consumer confidence and what our customer is able to afford if gas prices are higher, which is why the companies that are going to exceed during this -- to succeed during this time frame are the ones who can continue to drive profitable value because that is not going to change.

On the availability of drivers, we are staffed to levels that I'm very, very happy with, and that's been consistent for a long time, and we're not seeing anything there. Sandeep, on the guidance?

Yes. So I think what I said positive low single digits. That's exactly what it is. Anything positive in the low single digits would be what the guidance implies. And this applies to the U.S. as well as the international business. And that's why we just clarified that language in the guidance update.

Our next question comes from Andrew Charles with TD Cowen.

Great. Carryout had been a bright spot of U.S. business in recent years, appealing more to value-conscious consumers. And while the carryout same-store sales at 2.4%, we're still positive. I'm curious if you could speak to the narrowing performance between delivery and carryout year? You called out some weather impacting carryout Boost week, but what further kind of led that narrowing performance?

Yes. So Andrew, I think we're actually -- when we talk about the total comp and the total impact of the business, the impact was both to the delivery as well as the carryout side, the macro impact that we talked about coming in March, the competitive pressures that we talked about coming in as well and the weather impact earlier in the quarter. So all of that actually had that impact. But I think just keeping in perspective that the carryout business still grew 2.4%, and we did grow sales stores pretty materially as well. So the retail sales growth continued to be compelling. Our our share growth on carryout continued to be very good. And we're happy with the fact that we're growing, we just would like to grow more. And I think that's why all the initiatives that Russell talked about that the team is working very hard on are going to be impactful to the carryout business as well as we move forward.

I think I would just add to that, too, is we're talking a lot about our belief in continued category growth, but also continued Domino's growth. And I pointed to past success before. But I'd also point to that the people who have the most insight into the ability of Domino's to grow in the future and the folks who are spending their money betting on that growth are franchisees. And the pipeline is really, really, really strong. And so if you're looking for what are the people who are investing their own money and expertise and time would they think about the future perspective, it's not just here, the CEO and the CFO talking about what the future looks like, it's our franchisees are talking with their investments as well.

And then Andrew, I'll come back, sorry, I should have mentioned this the first time. I mean, the fact that we have a 20% share on carryout is super exciting. I just look at it as a huge opportunity. We have a right to win and actually gain share pretty significantly over there and get to, at the very least, the 33% share that we have on delivery and more as we get past it. So we're super excited about the carryout business. I think we've -- all the things that Russell talked about in terms of technology innovations are going to impact the carrier business as well, which I think is going to be a very significant driver of continued share growth as we move forward.

Our next question comes from Christine Cho with Goldman Sachs.

I'd like to discuss the international business. You mentioned that you're still expecting low single-digit same-store sales growth for the year. But have you seen any impacts from the war? And how does that compare to what you experienced in '23 and '24? Additionally, Sandeep, I think you mentioned that excluding DPE, your international business would have met expectations. Can you elaborate on that a little bit? And with the new CEO are now in place. Are you seeing any leading indicators that the turnaround is progressing in the right direction?

Yes, I think -- and we can tag on this one, Sandeep. On the international business being in over 90 countries, things impact things in a different way. When you look at our business specifically in the Middle East, One is we've -- we're in constant contact with our franchisees over there. And so far, they've not seen an impact from the war. And even they did, I'm not saying this is something we still don't hold dear, but it's just for perspective. That part of the world is probably about 2% of our operating income. Andrew Gregory, the new CEO of Domino's Pizza Enterprises actually starts in August, Christine, but we are still working very closely with their team. Actually, I've got -- on Wednesday, I've got a conference call with Jack Cowen, who is the Executive Chairman of DPE, and we're leading in -- we continue to lead with a big time to turn around that business. There, it's all about getting the value equation right, to start order count driving again, which then leads to sales growth.

So we're continuing to lean in with them there. And as Sandeep said, look, our job is to give reasons, but they're not excuses. If you took out DPE, the rest of our international business performed exactly as we had hoped it would for the quarter. So our job is, it's a pretty big focus right now on 1 part of the business, and that's what we're all doing.

And then just to add a little text here to the performance and then a little bit about the guidance itself. I think when we look at the bright spots, and Russell talked about excluding DPE, we were on track. And I think the European business, and that was driven a lot by the U.K., we just had an update that they announced recently was pretty good, and we were pleased with the Americas business as well and the performance over there. So when we talk -- when I'm moving to the guidance itself, when we talk about low single digits, we're just taking into account pretty much -- the answers are driven by your questions. I mean there's macro and geopolitical uncertainty, which has developed since the time we provided our February guidance, and we're taking that into consideration as we've updated to low single digits. And we're just monitoring this very carefully, but we feel the underlying business, excluding the impact of DPE, is where we expected it to be.

Our next question comes from Jeff Farmer with Gordon Haskett.

Just following up on an earlier question. So relative to that initial 3% U.S. same-store sales guidance that you guys had as of late February, which income cohorts or channels would you say saw trends fall for this below your expectations?

Yes. So Jeff, I think when we go back to what Russell talked about, when we look at the broad industry, of course, with the macro environment and the pressure on the low-income consumer, there will be broadly industry-wide impact that we would expect. But specifically to our own performance, the great news was we were actually pretty consistent across all income cohorts and grew across all income cohorts, which means a pretty narrow band in terms of performance. The part that I would actually bring back, and I don't remember who asked the question and who made the comment, but the competitive activity did make a difference in the quarter, but that's a very short-term and transitory impact that we think over the long term will sort itself out.

And we feel that, that's all taken into account in the guidance that we provided because we have ideas and plans that are going to be implemented as we move through the balance of the year.

I'd just say that maybe another way to think about it is that short-term headwind competitively, I think, is a long-term tailwind so...

Our next question comes from Danilo Gargiulo with Bernstein.

I want to ask a question on leverage. And specifically, Sandeep, during Investor Day, you laid out a decision tree that was informing how you were thinking about leveraging or deleveraging the business. Now with the increased uncertainty on macro and geopolitical environment, why is it the best option to continue to do share repurchases versus driving down the leverage to, say, 3 to 4x in anticipation of maybe volatility in the rate?

Yes, Danilo. I think when I go back to where we were at the time of the Investor Day, December 23, we actually were running at a leverage of 5.4x, if I remember right. And since that time, we've continuously delevered and we've gotten down to 4.3 as of this most recent quarter. And -- but I think the more important thing I would say on the decision tree was we were very clear based on where interest rates were and interest rates were pretty volatile at that time, too, that if interest rates remain at the level at which they were we would just refinance existing debt load while growing earnings and naturally deleverage. And if interest rates did go up, we would actually reduce our leverage, but partial debt paydown. And so since that time, I think what we've seen is that interest rates have been volatile, the tenure was about 4.2 at that time, now it's probably close to 4 -- somewhere in the same range, 4.3, 4.2. And so I think that decision tree does not change. And I think the part that I wanted to really address in the prepared remarks is, we stay very consistent in returning capital to shareholders and returning value to shareholders. And we've been very committed to the dividend. We've actually raised it by 15% this year, but on average, over the last decade, has been going up about 20% annually. And share repurchases is another vehicle that we actually believe delivers great value to shareholders over a period of time.

And so we're committed. We talked about the share repurchase authorization that we had approved by the Board. And we will lean in, but with discipline. We will make sure that from a decision tree perspective, we're paying very close attention to where interest rates are. We will be paying attention to where market volatility is. But we believe that by staying close to that low end of the 4 that we've talked about, we've demonstrated that we will stay disciplined.

I think the repurchase, in addition to what Sandeep talked about, is driven by a belief. It's driven by belief in the Domino's brand, a belief in what we can do over the long term and a belief that's a right spend on behalf of our shareholders.

Our next question comes from Sara Senatore with Bank of America,.

Maybe 2 clarifications. The first is, you mentioned, excluding the headwind from the DPE comp, you would have met expectations. I guess, DPE has been a drag now for, I think, probably 3 years. Is there a point at which you think about perhaps lowering long-term algo or the growth for the international market just because it seems like it's been a drag either from a unit or comps perspective for a while?

And the other follow-up is, you mentioned promotional impact is kind of transitory, which makes. Is this related to the closures? Is it possible that sort of the remaining stores are healthier? Or conversely, that maybe it's kind of the last gasp of struggling competitors? Just Russell, especially given how much perspective you have, what -- I guess, how long does this type of thing last in the context of pressured margins?

Thanks, Sarah. The potential for the markets that DPE is in long term and short term is far too big for us to ever think about taking down long-term guidance. What we need to be focused on is helping them untap that potential, one that they had been doing for a long time, but they're clearly not doing now. I talked before about value. But we're in constant conversations with them. 1 of the things that Jack Cowin talked about on a couple of calls ago is that they're open to looking at changing the structure of their portfolio, maybe what markets they own versus don't own. You should know that we've got contractual powers that we can leverage as well to drive change, and we're going to be doing all of those things. But the long term for the market that DPE has is way too high for us not to continue to tap that.

And I think just on the promotional impact being potentially transitory, yes, I mean, I think what we expect is the promotional intensity is high as potentially store closures are looming. And maybe there's some leaning in that's going on. But regardless of whether it's short term or not, I think the sustainability of that promotion is not going to work for the franchisee profitability of the competition. So either the stores will end up closing, or they'll have to stop doing the promotions because they can't afford the profits.

You're talking about the U.S. business?

U.S. business.

Yes, I just want to be clear, that's about the U.S. business and really back to what I was talking about before, which is potentially, in addition to some of the kind of the external headwinds, competition was a headwind for us in the quarter, but I actually really do truly think this will be a long-term tailwind because this is doing damage to the P&L of -- I believe, of their franchisees.

Our next question comes from Jon Tower with Citi.

Maybe just first, starting on the expectation for the macro in your guidance. Are you effectively just carrying forward what you saw in the month of March for the balance of the year. And then secondarily, obviously, the channel shift between delivery and carryout will impact mix. But what else is going on with check in your business in the U.S.?

So Jon, I think you're right. I think your question actually framed exactly how we're thinking about guidance. I think we've taken into account the incremental pressure that we saw in the macro and to the guidance that we've updated this time, and that's the base assumption. And I think in terms of channel shifts, delivery and carryout, we expected to grow both businesses. And I think when we look at this year and all the things that we're planning on, we're looking to have a balance between ticket and order count growth. And I think that's embedded in our assumptions. And that really didn't change. I think the timing of when all those sales would come obviously shifted a little bit based on how we started the first quarter. But that's pretty much how we're thinking about the year.

And I just maybe saying it in a little bit of a different way. The guidance has been updated. The goals have not been updated at all. And that's our job this year, and that's what we're doing in moving around things on the calendar. Everything that we are focused on is delivering on the goal, which is the high end of that guidance.

Our next question comes from Brian Harbor with Morgan Stanley.

I'm curious if you think advertising effectiveness has changed to some extent? I mean, was it less in the quarter, how people respond to that and how people respond to some of the deal-driven advertising? Is that something that you plan to change as you go through the year? Or is this more just about kind of new products?

Yes, Brian, we can get better in everything that we do in all aspects of our business. And so absolutely, are we going to continue to drive the renowned value and come up with new products, but our job is to develop great stories, stories that supersede or build upon what is great value or great innovation. And so our CMO, Key Trimble, is working very closely with the advertising agency. I mean the lights on every evening here. And I know not only some of the products on the calendar, but I know some of the stories on the calendar. You may know, my first job here at the company was Chief Marketing Officer. And I am really excited about the stories we're going to tell. It's not just spending the most amount of money at all, but it certainly helps, it's on top of the money is having the most compelling stories, and we're going to do both of those things in the second half of the year.

Our next question comes from Chris Carroll with KeyBanc Capital Markets.

Can you expand a bit more on the margin outlook for both the supply chain business and your company-owned stores for the balance of the year, maybe puts and takes around the food cost basket, potential impact from higher energy costs and maybe for the supply chain and how you're thinking about productivity gains at this point?

And then specifically, just on the company-owned store margins, I think they seem to come in a little bit lower than anticipated in the 1Q. So just curious how you're thinking about the various dynamics impacting the company store margins in the 1Q as we are thinking about the balance of the year here?

So thanks for the question, Chris. So let me start with the supply chain margins. And I think this is a story that's been really very, very strong for the last few years. And I think we're really proud of the work the team is actually doing on the supply chain side to actually navigate some of the cost pressures that we're seeing in the current environment as well. And we've actually been driving a lot of procurement productivity and the team keeps on pushing hard to actually get more value out of that business. And that's showing up in the profit growth that you're seeing on the margins over there. But also, I think we're driving gross profit dollar growth on the back of the volume that we actually are continuing to drive and expect to drive. So I'd say that's the supply chain business. And our expectation for the year is to see positive margin outlook on the supply chain business, as we talked about in February.

And so I'm going to now go to the company stores. And the company stores, there's a subtle tweak that we made in the earnings release. We actually did not talk about that as one of the KPIs from a profit perspective and a profit margin perspective, we have the disclosure in the 10-Q. The reason this was the case was this was really -- it's becoming less and less material. Last year, we still had Maryland in the portfolio, but we did refranchise it. And as we actually get to a place where the size of the portfolio of company stores is less, it's less material to the profitability of the company. And that's why we keep the disclosure in the 10-Q, but I think as the read-through to what's happening in our franchisees really isn't there when we only have 5 markets in which we are operating. And again, we had some discrete issues that we dealt with in the first quarter. We had some pressure from [indiscernible]. We had some pressure from the food basket, which actually was impacting on the business. We had some pressures in insurance as well as we outlined. But really speaking, when we look at the big picture on the total company, we feel like this is not that material to what's going to happen to the company. We believe that operating margins will continue to expand this year at the company level and where we feel pretty good about where that's going as we manage the puts and takes between the revenues and investments we need to make in the P&L to dive profit growth for the company.

And maybe just to add to that, Sandeep, the company store profit is not reflective of the profit for our franchisees, which continues to be strong.

And our final question comes from Jeffrey Bernstein with Barclays.

Great. Just wanted to talk again about the U.S. competition. I know Rusty, you noted the intensification, but yet good to see your increasing confidence taking share. I was hoping to maybe look a little bit more at the broader QSR segment. I mean, I know your largest pizza peers are increasingly aggressive on value, but it seems like the QSR peers with their values and deals and they have lots more outlets. And I know I'm guessing they're better positioned in terms of their franchisee health to be able to offer extended value without having to see closures. So maybe that's a potential risk to the historical 1% to 2% pizza category growth if we see again all the big burger and chicken players more sustainably pushing value, which seems to be on their agenda. Any color there would be great.

Yes, Jeff, certainly, what you're seeing throughout the industry is competitors, both pizza and not non-pizza, giving customers what they want. We actually talked about this last year, if you remember, there's a lot of value pressure last year. And one of the things I said was you need to give customer not just value for value's sake, but they need to value the things that you're putting value on. And that's why we were so excited about and continue to be so excited about promotions like Best Deal Ever, because there, it's not, "Hey, I want a large pizza, you're going to give me a small pizza at a discount." it's we're going to give you the large pizza at the discount. And what I think you're starting to see this year is competition in pizza and non-pizza realizing they need to do the same thing. At the end of the day, I think what that allows us to do is not only continue continue to put pressure on our competition and continue to grow there, but also just this value environment is not going to change, I don't believe, for the rest of this year.

When I look at our Q1 results and we look at some of the macros, we didn't see non-pizza be a significant impact, if we did, we would have called it out. But yes, I think we're going to just have a year where we're going to continue to compete. And I'm really glad we have the resources and our franchisees have the resources to do that.

Thank you, Jeff. That was our last question of the call. I want to thank you all for joining our call today, and we look forward to speaking to you all again soon. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q4 Full Year 2025 Domino's Pizza Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Greg Lemenchick, Vice President of Investor Relations and Sustainability. Please go ahead.

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 Weiner; followed by our Chief Financial Officer, Sandeep Reddy. The call will conclude with a Q&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 forecast. 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. [Operator Instructions]. With that, I'd like to turn the call over to Russell.

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 U.S. 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' results 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 #1 pizza company in the world.

I want to share what I think is the ultimate opportunity for Domino's in the U.S. 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. We've already achieved this higher market share in some of our international markets and in some U.S. 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 U.S., 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 U.S., 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 #1 in net store growth, number 1 in pizza and #1 in non-pizza. We grew over 1,200 net stores, while half the remaining top 10 public QSR 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 U.S., 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 U.S. franchisee per store profitability grew to approximately $163,000. Our strong results can be linked to our strategy directly. Our initiatives were effective across all 4 of our Hungry for MORE strategic pillars in 2025, and I'm going to focus though on 2 of them. One from our most delicious food pillar, Parmesan Stuffed Crust; and the other from our renowned value pillar, Best Deal Ever. 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. There have been 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. 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 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. 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 franchisee's increase profits, Domino's has something even more important in 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 U.S. 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 1 and done. We identify opportunities that have multiple years of growth ahead of them. For example, we committed to building our U.S. carryout business back in 2010. It didn't stop growing the year after we've 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 multiyear 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 2 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 crust types.

We will continue to drive the renowned value initiatives that have powered our business. We already have proven winners such as boost week and our Best Deal Ever promotion that we relaunched today. 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 midyear 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.

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 higher U.S. franchise royalties and fees and gross margin dollar growth within supply chain. This was partially offset by a decrease in U.S. 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 U.S. 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 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 U.S. 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 U.S. franchisee store profitability in 2025 came in at approximately $166,000, up $4,000 over the prior year.

Shifting to U.S. unit count. In Q4, we added 96 net new stores and 172 for the full year, bringing our U.S. 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 a 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 and 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: 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 will remain pressured throughout 2026.

Second, we expect our international same-store sales to be 1% to 2% due to continued pressures at DPE and impacts from our high-volume new store openings in China, which puts a slight drag on our comps despite being beneficial to retail sales.

Shifting to net stores. We continue to expect 175-plus net stores in the U.S., and we have a robust pipeline heading into the year to achieve this. Internationally, we expect to increase our net store growth to approximately 800 stores. This increase is primarily due to DPE's expectation of fewer closures and continued meaningful net store growth from our 2 largest growth markets, China and India. All this leads to operating income growth of approximately 8%, excluding the impact of foreign currency and refranchising gains.

A few additional points of color on expectations for the P&L in 2026. We expect our food basket to be moderate, up low single digits. Our supply chain margins to grow year-over-year due to procurement productivity. We do expect the amount of procurement productivity to be less moving forward than we have seen in the last couple of years. G&A as a percentage of global retail sales to be approximately 2.3%.

In February of 2026, we increased the technology fee by $0.01 to $0.385 per digital transaction to fund our technology initiatives. Operating income margins to expand slightly in 2026, primarily driven by sales leverage and supply chain margin expansion. Interest expense to be generally in line with 2025. At current exchange rates, we expect foreign currency to have a modest benefit on operating income. We expect our tax rate to be in the range of 21% to 23%, which is consistent with 2025. And lastly, we expect CapEx to be approximately $120 million due to investments we plan to make in our corporate office before reverting to our algorithm of $110 million in 2027.

Thank you. We'll now open the line for questions.

[Operator Instructions]. Our first question comes from Brian Bittner with Oppenheimer.

The question we continue to get, as you're well aware, is just related to investors' skepticism about whether you can keep up the solid performance moving forward in '26 after a very successful '25? And taking market share remains an important component of hitting your same-store sales targets, so can you talk about what you see as the biggest share drivers in '25? Do you think there's actually an opportunity to accelerate share gains in light of competitive closures?

And just separately, on the industry, it does continue to grow, which I do think may be an underappreciated dynamic. Can you just maybe talk about what's driving the stable growth of the industry?

Yes. A couple of -- maybe I'll start with the first question, then Sandeep, you can do on -- talk about the second one.

When I think about '26, I refer back maybe to what I talked about in the script. I think a lot of the discussion has been around almost spreadsheet-like look at the year. Okay, you had this last year, how are you going to lap that in '26? And if you look back at our results over time, I think what you'll see is we're not a one-and-done company. We launched things that got legs far beyond the year in which they're in launch, and then we bring new things on top of them in 2026, so -- or 2027 in the future.

So one thing I can tell you about 2026 is you should expect in line with our Hungry for MORE strategy: M, 2+ product innovations this year. On O, operational excellence, we're going to still continue to drive efficiencies in our stores, which drive profits, which drives that amazing store count I talked to you about earlier. And then renowned value, we're out there right now with Best Deal Ever.

And so it's just -- it's important to understand that when we launched stuff and the examples I gave, for example, were a carryout and loyalty. Carryout, we launched in 2010, and it's still -- I'll let Sandeep talk about, over 6% in the quarter. loyalty continues to grow. So we think all that stuff will continue. So I think in '26, in addition to what we come out with, continued growth of loyalty; aggregators, we said we're not in our fair share yet, so there still should be both in Uber and DoorDash growth there.

Carryout, we expect to continue to grow. Stuffed Crust, we've got ahead of us. I think, long headway. We've got a brand-new website that runs better than the old one. A brand refresh. There are a lot of things. I could go on and on, but Greg is telling me I'm running out of time.

Sandeep?

All right. So let's talk about industry growth. And I think that to me as going through even what we talked about the last quarter, we talked about this on the call. This industry has been growing 1% to 2% for definitely since 2019 and even further back. And what we saw in '25 was very representative of what the industry has been doing over the years. And we expect it to continue to be doing the same thing going forward as well.

And so when we think about this, what is really impressive for us is the way we've actually consistently been gaining market share from our competitors. And I think this is actually highlighted by 2 things: One is our consistency in driving same-store sales growth. The other is our franchise economics, which are significantly better than the competition. We opened '25 with a massive gap against all of our competitors, including the bigger national competitors. Guess what's happened since that time. One of our national competitors has announced that they've had a negative same-store sales in the mid-single digits. And they also talked about closing a number of stores, up to 250 stores, in the first half of the year.

All this plays into our strategy to continue to gain market share because we will go into that 1% to 2% growth in the industry with less doors outside, which we can actually take share from effectively and grab those sales. And this is just a continuation of what we talked about at Hungry for MORE and what we've been doing for years. That's how we look at what's going to come in 2026 and beyond.

Our next question comes from Dennis Geiger with UBS.

Congrats on the strong 4Q and full year results. Russell and Sandeep, I wanted to ask a bit more on the U.S. sales outlook for that 3%. You guys gave a lot of detail around plenty of runway from those existing initiatives that you came out with last year. Would it be possible to kind of highlight how you think about contribution from those existing initiatives versus maybe some of the newer stuff, whether it's the 2 items, other promotional deals this year from newer stuff? Any high-level thoughts just on is the bulk of what drives the U.S. comp from initiatives that are already in play versus some of that new stuff that may come out this year that we'll see more as the year goes on?

Dennis, it's Sandeep. So I'll take this one, and I think I'm going to just do a bit of a framing and then I'll get into some of the initiatives that Russell already talked about, but I'll just repeat them afterwards.

So first of all, I think from a same-store sales perspective, we talked about 3% for the year. We did say it's going to be higher in the first half than the second half. And I would be remiss if I didn't address what I think a lot of the industry has already been talking about, which is weather has been tough in January, it had a disruption on us. We had to close a number of stores like many others. And that factor is included in our same-store sales estimate.

So we acknowledge the pressure in the early part of the quarter. But I think in our business, weather tends to even itself out over the year. And so as far as we're concerned for the full year, we don't see that being an impact. But clearly, it was a disruption in January. And I want to make sure we we hit that and make sure we address it.

So in terms of the initiatives. Russell talked about it a lot in the prepared remarks. But Look, the thing about our business and acknowledge this, last year definitely had a few headline events that we talked about in '25. We were really thrilled with Parmesan Stuffed Crust. We were really excited to be launching with DoorDash. And I think the really cool thing was we'd already talked about renowned value and then we brought in Best Deal Ever that ended up being a significant comp driver.

None of these go away. They're all definitely there in the business in our baseline, and we expect these to compound over time as we move forward. In addition to that, Russell talked about the carryout business, which has been on a tear. I mean, we grew 5.6% on the back of significant growth in the previous year as well. And just going back to the fact that we've actually gotten to $4.4 billion on the carryout business, which is bigger than 2 of our national competitors on their total business.

So in order of magnitude, with that kind of base, the compounding impact of growth on that on our total sales is very material. You didn't take the layer that we added as an accelerator to it, which is the loyalty program that we launched in '23. We stated before that our objectives with the loyalty program was definitely to be catered much more to the carryout customer and also to attract light users. And we just talked about the fact that we're up 20% on the number of customers that have come into our loyalty program. So that becomes an accelerator to this fantastic carryout business that we're talking about.

And then last year, when we initially talked about it, we talked about renowned value, but we didn't talk about Best Deal Ever, but Best Deal Ever came, and it actually drove significant value for our consumers and for our profits as well. So we have a whole bunch of initiatives back to what Russell talked about on the menu items that are going to come out and we're going to lean on our 4 pillars. We're going to lean on our 4 pillars and drive multiple initiatives that add up to the 3%. We don't talk about all of them just from a competitive perspective. But believe me, the competitors will find out as we go through the year.

Our next question comes from David Palmer with Evercore ISI.

Question on delivery. I think one of the things that -- this is a bit of a follow-up to Brian's question is just people have a hard time seeing long-term sustainable delivery same-store sales growth. They look at what happened in '25, particularly the fourth quarter, there was the Best Deal Ever and MORE promotional intensity, but also obviously, DoorDash and the delivery comp was 1.6% up. But that was a lot of firepower against it. I felt unusual. So I guess maybe how do you reflect on the fourth quarter, the 1% for '25? And just your outlook for delivery, that half of the business going forward on a sustainable basis?

Yes. Thanks, David. The way I look at delivery, especially regarding the aggregators is, we're not at our fair share. So our -- we're about 1 out of every 3 deliveries out there. We're not on that on Uber, which has been more than a year and DoorDash, which we got fully up to, call it, Q3 of last year. And so that was kind of my point from before, when you launch something, you don't get to the full potential year 1 unless you're managing it in an irresponsible way.

We continue to manage those 2 platforms for incrementality because a lot of our kind of self-help initiatives are doing well. And so we're growing it slowly over time. We're not at our fair share. So there definitely is upside.

Second, when you think about what works on those platforms, it's what works in the digital media. We've got -- what works in digital media is the expertise on how to run it and the dollars in order to buy your media placement. We do really well on marketplaces and all these things are marketplaces.

And I think last is the business is a delivery business and a carryout business. So I still think, and we are growing our delivery business. We're still not at our fair share yet, but remember, carryout is actually bigger than delivery. We only do 1 out of every 5 carryouts, and that business is growing significantly. So I think at the end of the day, what folks are looking for is growth.

I'm going to add a little bit more texture though because we concentrate a lot so far on the call on same-store sales. I want to take a step back and just really point out the engine that is Domino's Pizza, which is same-store sales and store growth, right? We talked about and I -- this may have been a surprise to some of you. But if you look back to 2019, pizza or not pizza, if you look at public restaurants with 3,000 stores or above, we're #1 in growth.

And so part of the reason I think you're seeing the impact on the competitors that you are is because now people have a choice in their neighborhood and Domino's is there. And when Domino's is there, they pick Domino's. When we grow these stores, especially from a split perspective, we split an area, 2 things happened: 80% of the customers that come in on carryout are incremental. But David, to your point before, our delivery business gets more efficient. And the quicker we can get more hot pizza to our customers, the better it is for your delivery business. So all of this truly is the domino effect of all the initiatives working together.

And David, I think I'm just going to just add a financial component just to make sure that we understand. I think Russell talked about that we are managing the business for incrementality and profitability and really playing the long game. But I think when you put numbers to what Russell was talking about, you take the 1% same-store sales, you add the store growth, you're talking about 3-plus percent or around 3% our growth in retail sales on the delivery business, which far outpaced QSR Pizza Hut delivery, and we gained share.

We gained about 1 point of share in delivery, we gained about 1 point of share in carryout and a point across the entire business. So we're really happy with the delivery business and what we got out of it in 2025, and we're very confident as we move forward in '26 as well, especially given the really tough macro backdrop that we've been seeing in '24 and '25.

Our next question comes from David Tarantino with Baird.

Russell, I think you mentioned the concept of doubling the U.S. retail sales over time and I don't recall you mentioning that before. So I guess if you could clarify that, is it a new goal to do that?

And then I guess my questions are over what time frame do you think that's possible? And does that sort of imply you're thinking a little differently about the unit opportunity? I think you mentioned 8,500-plus at the last investor meeting. Is it now something maybe higher than that as you think about the current competitive landscape?

The interesting thing is, I started downloads in September 2008. And I remember back when we said, "Hey, we're going to be the #1 pizza company out there," and that seemed like a stretch. And obviously, we're at that today. And so what I do is I just look at a couple of things. One is our continuous gain in market share, 1 point a year for the last 11 years. .

I then say, okay, well, let's look at other categories where -- and what is the share of the #1 players? We're about 1 out of every 4 pizzas. Well, the #1 players are 40-50 share. And look -- and so looking at where we are, the assets we have in our franchisees, their profitability, our marketing, this should just -- why shouldn't we be as big as the other players are in their category. It's something we have continued to do over time and we're headed that way. So it's -- yes, it's part and apartial for what we've been achieving.

Yes. And David, I think from a guidance perspective, we've really talked about guidance through 2028. And that really implies a point of share through 2028. And we're really not going to comment past 2028 in terms of cadence, but I think we're just framing the opportunity, just like we did say 8,500 stores, we believe that there's an opportunity to get to double our retail sales of about $10 billion over time.

And I think that's really super important. And I think the other thing that Russell I think said at Investor Day, if I remember right, is every single time we thought we'd actually come up with a new goal in terms of full potential that goal is kept going up. I think it was the...

6,000 or 7,000 and it's 8,500, it's not because we're bad at forecast. One of the things that happens, I talked about store growth before, and you're seeing this, when we grow and we grow closer to where a competitor is, a lot of times, we closed that store. And so if you think about competitive closures, that actually is more opportunities for more stores.

And so that's something we're going to continue to lean in on. And I really urge people, I know it's same-store sales are a number everyone focuses on, and we are too, we're guiding to 3% this year. But if you don't take a step back and look at total retail sales, which includes sales from the new stores, you're going to underestimate, as Sandeep said before, how well we're doing in the delivery. But you're also going to underestimate how well we're going to do in the future because we are putting more points of contact for consumers out there.

Our next question comes from Peter Saleh with BTIG.

Congrats on a great quarter and the year. I wanted to ask maybe if you guys could comment a little bit on the performance maybe by income cohorts? There's been a lot of discussion about that younger, lower income guests kind of stepping back. Can you guys give us a little bit of color on what you're seeing there?

And then also, historically, you've been talking about how delivery and carryout are kind of separate occasions, different customers. Has that changed recently? Have you seen any more switching between the 2 or has that stayed pretty consistent?

I'll maybe do the income cohort question, you can follow up. Certainly, in QSR, there have been a lot of stuff written about the lower income cohort declining. That is not something that has happened in Domino's. We grew all income cohorts in Q4 and for the full year.

Yes. Look, we've been seeing very consistent results in terms of the delivery carryout overlap, which would be in the mid-teens over time. And we haven't really seen a change on that. So these tend to be very different occasions. And that's great because the addressable market is available for both sides.

Our next question comes from Gregory Francfort with Guggenheim.

My question is just, Russell, can you provide an update on maybe changes in '25 to your tech stack? Or you guys -- you're known as a technology-forward company. And then as you look to hold or things you're trying to address in either '26 in the next couple of years, what stands out?

Yes. Well, last year was a big year for us on the consumer side and the store side. We relaunched our e-commerce site online and also mobile web. We'll be launching this year the apps versions of all those. The new site that's up already is performing better than the old site, which is something that we said we were going to do. We're focused on the same thing for the app as well.

Additionally, our DOM OS system continues to get better. And so Greg, just as a reminder, that's our system in store that helps our -- that helps run the store. We talked a lot last year about this idea of -- I've talked this one forever. We make products before consumers finish ordering them because of our technology, we're able to look ahead of the order. But also from a dispatch standpoint, we have smart dispatch that helps route our orders with our stores.

Well, now the front end of that, the order; and the back end, the dispatch, are starting to talk to each other and with -- via an orchestration engine. And so now if there is not going to be a driver back and we have this in about 6 stores now, so I expect this to continue to increase. If there's not going to be a driver back in time to get a pizza when it gets out of the oven, and it's going to get out of the oven a couple of minutes later, well, our technology, this orchestration agent will hold that order, so the store doesn't see it. And so my goal at the end of the day is kind of real-time pizza making and delivery. And so that's some of where we have been and some of where we're going both on the consumer and the store side.

Our next question comes from Danilo Gargiulo with Bernstein.

Great. Sandeep, I wonder if you can give some color on this insurance costs, like outside insurance costs that are impacting your restaurant level margins in your stores? And more in general, can you comment on the level of restaurant-level margins that you're targeting this year? And what do you think is sustainable, maybe not just for Domino's but for the restaurant industry or maybe for the pizza category, as a restaurant-level margin going forward?

Yes, Danilo, thanks for the question. And look, I mean, I think when we -- and I talked about in the prepared remarks as well, the corporate stores, which are about 260 out of the total 7,200 that we have roughly, is one that was impacted by the outsized insurance costs. It definitely impacted the corporate store P&L. I just want to first just say, yes, this was material to the corporate store P&L, and it was big enough that we called it out at the company level as well.

However, when I look at the franchisee performance and I look at what we actually delivered to the franchisee performance, we had a 3% same-store sales growth last year. And if you go to the franchisee economics, it grew at approximately the same rate. So we held the margins. And so including all of these insurance pressures, there are levers that the franchisees in the much larger portfolio that we have in their remit, basically are driving very good profitability.

So we don't really have concerns about the franchisee economics, and I want to make sure that I touch on that. That being said, we are conscious of the fact that there is insurance pressure in the marketplace, and it did impact us. And so we want to acknowledge it. We want to be clear and we need to find ways to find productivities to offset some of these pressures, and we did in 2025, and we're able to actually find a way to actually grow our profits [indiscernible].

And no, I'd just say the other thing to think about is on the franchisee side is that we ended last year the average number of store per franchisees was 9. And so the enterprise profit for our franchisee is kind of approaching $1.5 million now, which, if there are bumps in a particular year, allows them to get through those bumps. And so we're excited not only at the store level profits are increasing, but the enterprise ones are as well.

Our next question comes from Sara Senatore with Bank of America.

Actually, one quick follow-up on a question. The question is actually about the delivery business. I guess, broadly across the industry. It seems like exclusively the growth, and this is not just pizza, this is everywhere, is coming in 3P versus 1P. So we hear a lot from other companies talking about how 1P has either been steady or mostly declined. So I was just curious whether you think there is continued opportunity to grow 1P deliveries, again, this is more industry-wide or if we've sort of gotten to a point where growth kind of comes exclusively on the aggregators, again, for the restaurant industry as a whole?

And then just quickly on the comp. I don't know if you disclosed the price you had on the fourth quarter, but just wanted to see if I could get that?

Yes, I'll address both these questions. And let's start with the delivery business, and I think it's more of a broad industry comment that you're making on 3P versus 1P. And I guess with 3P having really been in place for close to a decade at this point and as we gain scale around the time of COVID, many other restaurant companies had already gone on to the 3P well before we did. We only got on '23-'24.

So we're in the process of getting on to 3P like Russell talked about earlier. So I think it's a little bit early to actually see kind of what's happening overall. We've we have a sense that overall, the delivery business has been pressured in the last couple of years with the macro, but it still grew. And I think we still are seeing share growth overall and we're managing for incrementality and profitability like we talked about. So we do see that there -- once things stabilize and normalize, once we've annualized completely on 3P, there should be growth both in 3P as well as 1P, and we should participate in both sides.

So with that, I'm actually going to move to the comp question that you had and you asked about pricing. And you may have missed it, but I said pricing was flat, and that's why we are so happy with our franchisees, the discipline that our franchisees have actually shown over the last few years going into Hungry for MORE and then since we have sort of been executing Hungry for MORE, has been fantastic. And that's why when Russell talked about profit power versus pricing power, this is exactly what it is. With that type of pricing, we're able to drive incremental profits to our franchisees. And these economics are just I'm sure of everybody in the industry.

Yes. So if you think back to the comment earlier on same-store sales, the quality of the same-store sales being order count driven versus ticket driven really speaks to the opportunity in the future, the kind of basic marketing is trial, repeat, depth of repeat. You don't increase trial when you increase price, right? But the reason why people keep coming back for carryout and loyalty and Stuffed Crust and all of these products is because we maintain a fair price and we have fantastic execution by our franchisees. So the quality of how we got to the 3% gives you a sense of why we're so confident that that's going to continue.

Our next question comes from John Ivankoe with JPMorgan.

The question is on U.S. store growth. And certainly, Russell, your comments around the U.S. market opportunity being double what it is, it's very interesting. So you comment on the path to 7,700 U.S. system stores in [ 2018 ]. If we have a chance to front-load any of that, especially given some competitor kind of softness. Is there a date where you could do 8,500 stores in your mind? And I know you've kind of been doing under 200 stores a year net in the U.S., does it make sense to actually go higher given higher market opportunity?

And where I'll conclude this question, and they're all related into one is how we're thinking about store splits? In other words, the impact of a new store sales on existing stores that very well may share in existing delivery trade area? Are you able to better measure that and perhaps minimize the impact to a market overall? Thank you so much for answering the new store development question.

Yes. Sure, John. I mean I think the better way to look at our store growth is actually look at closures. So we closed in the U.S. last year on a base of over 7,000 stores, 7. The year prior, we closed 6. And so when we open up a store, it stays open, and we want to continue to be as aggressive as we can. And as I said before, since 2019, no one's been more aggressive than us. You can open a lot of stores, but if your net store number isn't big, then all you're doing is replacing one with the other.

And so we're going to be as aggressive as we can to continue to make this a partnership with our franchisees and both win. And so that to me the closures is the more important thing, and that increases that and profits increasing, increases the interest our franchisees to invest.

Yes. And I think, John, you did mention splits and the impact of split. So this is the reason to be very careful at what pace you go because when you do do the splits initially, you take a little bit of a step back and then you grow into it. So the profitability of the franchisees needs to be protected as we go along this growth path, and that's exactly the approach that we take.

And it's because we're protecting that profitability, back to what Russell said, 7 stores last year, 6 stores the previous year. And that's something that we keep in mind and are very careful and conscious about to not go so fast and recklessly where you could have an impact where you end up having store closures. We want to protect against that.

Not go so fast, but still faster than anyone else with over 3,000 stores in the U.S. yes.

Our next question comes from Chris O'Cull with Stifel.

This is Patrick on for Chris. My question was just on international development. I was hoping you could comment a little bit more on the visibility you have into the pipeline today for '26? Just any potential risks to that 800 units this year and just your level of confidence around how achievable that is? And longer term, I mean, I know it's been a couple of years and you talked about the importance of getting DPE back to being a net contributor. But do you have multiple paths to get back to that 975 a year over time? Can India accelerate or China? Or does it have to be DPE getting back to the level of contribution that they had previously?

Yes, both India and China actually have accelerated. And a good portion of those 800 stores are going to come from those markets. So look, we talk about another 200 stores this year versus last year. So with the closures of DPE behind us, some of that headwind has gone. Now them returning to growth as part of what gets us back to the algorithm. If you look at the algorithm we talked about in Hungry for MORE at our Investor Day, the major cause for any slight miss in that algorithm on the store side or this year, as Sandeep pointed out, on the same-store sales side has been DPE, which is why we're so encouraged with their new hire of Andrew Gregory and the amount of work we're doing together.

Sandeep, next week is getting on a plane. He's going to bring his pillow from home, so he will sleep well. going to Australia with our Head of International, Wage King. We're on the phone top-to-tops all the time, and we're working with them to turn around that business. It's an important part of our growth.

And one last thing I'd say on DPE, Australia, in particular. When I was talking about earlier, places around the world where we're 40-50 share, Australia is one of them. And so that is a place from which we are -- certainly need to fix the business, but we're working from a place of strength in Australia.

And Patrick, I'm just going to add one thing just on the guidance topic, since you brought it up and you asked about the multiple parts, 2 different things. When we look at where we are either for last year or for the guidance that we're talking about, really speaking, excluding the impact of DPE, generally, we're in line with the rest of the international portfolio. .

And while India and China have been doing fantastically and accelerating that was already in kind of what our expectations were. So it's great. But I think I just wanted to make sure that you're clear about that. And I don't believe that ex DP getting back to what our initial assumptions are, there's a pathway to get to 925 that we initially guided to because everything is just really running to plan. It's not running ahead of plan. And so I just want to make sure that, that's clear as we talk about the outlook for the year.

And our final question comes from Jeff Farmer with Gordon Haskett.

Just a quick follow-up to Sara's question and then another 1 real quick. But what menu pricing is assumed in that 3% same-store sales guidance for 2026, coming off the flat pricing in Q4? And then can you guys just share any impact you've potentially seen on -- as it relates to GLP-1s and your business? Just any update there would be helpful.

I'll do the GLP-1 and then share pricing. Yes, so on GLP-1, obviously, we continue to watch that closely. We have not seen an impact on our business so far. Obviously, coming out in coform we're going to wait and see if there's any implication there. Right now, though, when you read the literature on GLP-1s, it's really more kind of breakfast and lunch-focused and dinner for us is a sharing occasion. So perhaps that's why we're not seeing any impact, but we're going to continue to watch it. And with 34 million ways to make a pizza, we got a lot of choices out there. But if there needs to be menu innovation around that, we will do that.

Yes. And I think specific to pricing, you'll probably catch it in the transcript when you read or listen to it later. But we talked about low single-digit expectations on pricing for 2026, and that's what's embedded in the 3% guide.

Thank you, Jeff. That was our last question of the call. I want to thank you all for joining our call today, and we look forward to speaking to you all again soon. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Third Quarter 2025 Domino's Pizza, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Greg Lemenchick, Vice President of Investor Relations and Sustainability. Please go ahead.

Good morning, everyone. Thank you for joining us today for our third quarter conference call. Today's call will begin with our Chief Executive Officer, Russell Weiner; followed by our Chief Financial Officer, Sandeep Reddy. The call will conclude with a Q&A session.

The forward-looking statements in this morning's earnings release and 10-Q 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 forecast. 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.

Thank you, Greg, and good morning, everybody. I'd like to start off by saying how incredibly proud I am of our team and our franchisees as they continue to bring our Hungry for MORE strategy to life and deliver best-in-class results.

It was a great Q3 for our U.S. business. We grew in all areas key to our success. Our carryout business was positive, our delivery business was positive, and our order count growth was positive. All of this resulted in meaningful market share growth. The momentum we're seeing in the business is due to initiatives that are working across all 4 of our Hungry for MORE strategic pillars. When we execute against Hungry for MORE, we drive more sales, more stores and more profits.

Let's start with our Best Deal Ever promotion, which was a meaningful driver of our strong U.S. results in Q3. In my opinion, Best Deal Ever is well the best deal in restaurants. The price point screens renowned value and the taste drives our most delicious food perceptions. After all, consumers are building and eating their dream pizzas. In a world where prices have gone up and discounts never seem to be on the items you truly want. Domino's gives customers their favorite pizzas at our best price. Best Deal Ever also highlights the operational excellence our system has achieved. We wouldn't have been able to execute this kind of promotion just a few years ago. the myriad of ever-changing topping combinations customers are putting together requires best-in-class operations that was unlocked by franchisees leveraging our training programs and Dom.Os systems.

Last but certainly not least, Best Deal Ever is driving franchisee profitability. Because of the scale of our media and purchasing power, Domino's can drive the volume it takes to make a great deal like this profitable for franchisees. In fact, Best Deal Ever has been running longer than we originally planned because our franchisees asked to bring it back. Domino's franchisees are truly Hungry for MORE.

Parmesan Stuffed Crust Pizza was another contributor to our strong results in the quarter. This launch has gone extremely well and continues to meet the expectations that we had for it on every level, mix, incremental new customers and franchisee profitability. Most important, our teams continue to execute this complex product very well, which is key to its long-term success. The new flavors of Bread Bites we just launched marked our second innovation of the year and highlights our innovation with intent approach.

Our intent with this innovation was twofold. First, adding 2 new flavors, garlic and cinnamon, brings news to the Bread Bites platform that we launched in 2012. Second, by adding these Bread Bites flavors, we were able to remove the more operationally complex bread twists from our menu. In addition, customers prefer the taste of bread bites over twist and love that they can get 32 Bread Bites for $6.99 as part of our mix and match deal. Another part of our renowned value barbell strategy is tapping into the aggregator marketplace for pizza delivery. Q3 marked the first quarter where we were fully rolled out on DoorDash and we remain encouraged about its long-term potential for our business. We continue to expect our sales on DoorDash to grow as awareness and marketing increases and believe this will be a meaningful contributor to our U.S. comps in Q4 and and as we move into 2026.

I wanted to quickly touch on the progress we continue to make on the upgrades to our e-commerce platforms. I'm excited to announce that we are now fully live with our website and mobile web experiences, where our goal prior to full launch was to see our conversion equal to or better than our old platform. The new site does just that. It's much quicker in particular, during the checkout process, which provides a better user experience. The apps come next, and our goal is to have them rolled out by the end of the year.

Next is something our entire system is buzzing about. We are bringing all aspects of Hungry For More to life with a completely new brand refresh. It's our first in 13 years. The new campaign makes every aspect of the brand as craveable as what is inside the box. The new look and feel will roll out over the coming months in all of our marketing. Hungry for MORE is no longer just a strategy. It has a look, a sound and the heartbeat. Seeing everything come to life this year gives me the confidence that in 2026 and beyond, we will be able to achieve our goal of 3% same-store sales in the U.S. and continue to take meaningful market share.

We have best-in-class franchisee economics in QSR pizza, the largest advertising budget, a supply chain with incredible purchasing power and a rewards program that is bigger than ever. And we're just getting started. As you know, we don't usually do LTOs at Domino's. So everything we have launched over the last 2 years, aggregator ordering, new loyalty platform, Stuffed Crust and more is a part of our base and will be part of our growth in the future. And we will continue to add new products, technology and renowned value promotions on top of that. This will be how we drive best-in-class results and long-term value creation for our franchisees and shareholders well into the future.

I'll now hand the call over to Sandeep.

Thank you, and good morning, everyone. Our third quarter financial results continue to be impacted by a challenging macro backdrop, but we drove profit growth that was slightly ahead of our expectations due to our strong sales performance and the timing of investments. Income from operations increased 11.8% in Q3, excluding the impact of foreign currency. This increase was primarily due to higher U.S. franchise royalties and fees and gross margin dollar growth within supply chain. Excluding the impact of foreign currency, global retail sales grew 6.3% in the quarter due to positive U.S. and international comps and global net store growth.

In Q3, retail sales grew by 7% in the U.S. driven by same-store sales and net store growth. This growth was slightly ahead of our expectations due to the strong performance from our best deal ever promotion. We also paced well ahead of the QSR pizza category which has grown over the last quarter to approximately 1% year-to-date. Same-store sales accelerated to 5.2% for the quarter on the strength of our best level promotion and Parmesan Stuffed Crust which drove positive transaction counts.

Average ticket benefited from 1.3% of pricing and stuffed crust, which carries a higher price point. This was partially offset by a slight decline in our mix due to a higher carryout business that has a lower ticket than delivery. Our carryout comps were up 8.7% due to the previously noted initiatives as well as continued growth from our loyalty program. Delivery was positive 2.5%, and primarily driven by the strength of our best level promotion and staff cost. It also benefited from aggregators coming from the launch of DoorDash.

Shifting to U.S. unit count. We added 29 net new stores, bringing our U.S. system store count to [ 7,019 ]. International retail sales grew 5.7% and excluding the impact of foreign currency in the quarter. This was driven by net store growth of 185 and same-store sales of 1.7% that met our expectation. In the quarter, we continued to see strength in Asia, which was primarily due to strong comps in India. We have not seen any material impact to date from global macro or geopolitical uncertainty.

I wanted to highlight the refinancing transaction that we completed in the third quarter. We had 2 tranches of debt totaling approximately $1.15 billion with a blended interest rate of approximately 4.3% that was due in October of this year. We paid down approximately $150 million of this and refinanced $1 billion in 2 $500 million tranches at a blended rate of approximately 5.1%. We were very pleased with the outcome of this transaction. We expect it to have an immaterial impact on our interest expense in 2025 and in 2026 and beyond. As a reminder, our next 2 tranches of debt come due in July 2027 and and total approximately $1.3 billion.

Moving to capital allocation. We repurchased approximately 166,000 shares at an average price of $450 per share for a total of $75 million in the third quarter. At the end of Q3, we had approximately $540 million remaining on our share repurchase authorization.

Now turning to our outlook for 2025. We continue to believe that global retail sales growth should be generally in line with 2024. As part of that, we expect the following: First, we continue to expect our U.S. comp for the year to be 3% and to grow our market share meaningfully in QSR pizza. Our comp could be pressured by the macro environment in the U.S., which we have seen intensify across the restaurant industry at the start of our fourth quarter. Second, we continue to expect our international same-store sales growth to be 1% to 2%. This could turn towards the high end of the range if we do not see any material impacts from macro and geopolitical uncertainty for the balance of the year. Third, our pipeline remains strong in the U.S., where we continue to expect 175-plus net stores and internationally, net store growth to be in line with what we had in 2024. We continue to expect operating income growth of approximately 8%, excluding the impact of foreign currency, severance expense related to the organization realignment we previously announced in Q1 and the refranchising gain in Q2.

Thank you. We will now open the line for questions.

[Operator Instructions] Our first question comes from Dennis Geiger with UBS.

I wanted to ask a little bit more about the U.S. sales outlook, same-store sales outlook for the year, the reiterated 2025 guidance for 3%. You talked about the difficult macro there. Could you just kind of break down maybe anything on what you're seeing at a high level thus far sort of unpacking that macro dynamic and the impact on the business? And then just the confidence in that number, given some of the initiatives that that seem to be resonating across the promotional activity and some of the other levers?

Dennis, thanks for the question. Yes. No, I think as we said in the prepared remarks, we're reiterating our 3% outlook for same-store sales in the U.S. And I think as far as we are concerned, we've been talking about the macro environment being a key factor all year. So this is not new. But I think what we did want to point out was we've definitely been seeing a slowing across restaurant industry sales to start our fourth quarter, and that's just a factor that's out there. But as far as we are concerned, we are expecting to continue to gain share against the QSR pizza industry. We've done so really well so far this year, and we expect to continue to do that in Q4.

So from in terms of initiatives, we actually are running best delever, as you know, right now. We're excited about DoorDash and the continuing impact of DoorDash as we called out from the beginning of the year to be more of a back half impact. So it should continue into Q4. And we'll have a whole bunch of stuff going on from the renowned value perspective as we move forward. So we just want to make sure that we do all the things that we need to do in terms of initiatives and drive them. and we're excited about our business. But I think we just wanted to point out that we're observing what's happening in the macro environment.

And Dennis, it's Russell. I would just say in this kind of environment, what I'm very confident that we'll continue to do is drive market share. And what that does is it really puts distance between us and our competition that puts pressure on the economics of their stores. So even some short-term restaurant headwinds leads to share gains and long-term gains for Domino's in that environment.

And our next question comes from the line of David Palmer with Evercore ISI.

Russell, I was just hoping maybe you can make a comment about the overall delivery market and what you're seeing, not just from a consumer standpoint, but competitively, it looks like and where we're sitting, like there is a lot of maybe desperate discounting promotional activity on the third-party sites right now. Effectively, it's it's the industry's version of stuffing the channel late in the quarter, you saw a lot of this activity, and we're seeing these deals pop up on our app. So could you speak to the broader ecosystem of delivery right now and what's happening there? And how do you see this playing out? Is this sustainable? What does it mean for you and maybe the pizza category?

Yes, David. I think if you take a look -- if you take a step back, that's part of why we're happy that our -- both our delivery business and our carryout business was up for the quarter. There are a lot of pressures out there, but the fact that we're able to sustain that -- and I'll maybe use your words in a second to sustain that profitably is really important. I think we got to look back at the note, I think you used desperate pricing or something like that. I'll compare that to our renowned value. this is value that we put out there that absolutely is aggressive and is aggressive. Certainly, if you're a competitor of ours with different store level economics, different ability to drive volume, different ability to bring food cost down to a manageable amount. But the value we have out there is value we can sustain. So yes, I think we're -- we've got a lot of growth in carryout and continued growth in delivery as more and more people come into delivery, they're having to buy their way into it. And I think in that kind of marketplace, we succeed, we excel.

And Dave, I'm going to add another thing on this because we talked about this from the get-go and the aggregator channel, but we are pricing for profitability of the franchisees. So no matter what's going on in the delivery channel, we've actually been able to optimize that and we'll continue to optimize that as we'll learn more and move along. And more importantly, I think just to put context behind what's going on in the delivery business, in a challenged environment to put up like the comps that we did, plus the new stores that we've opened, we're talking about close to mid-single digits retail sales growth on the delivery channel in a very tough environment. So we feel really good about our delivery business. We understand what's going on in the landscape. But we have the best franchise economics, and we have the best ability to price for profitability in the industry. So we feel confident that we're doing the right things.

We get excited about delivery here at Domino's Pizza. I'd say 1 addition to that. is this is why I'm so bullish about our long-term prospects on aggregators. We deliver like 1 in every 3 pizzas out there. We're not at that share yet on aggregate yet on aggregators. And I think a lot of that is because, well, one, we just started -- we just got on DoorDash. But we're still growing and there is pricing that in some places for the competition is probably not sustainable. And over time, that's what's going to enable us to grow to our fair share. And that's why I think aggregators are a multiyear tailwind for us.

Our next question comes from Brian Bittner with Oppenheimer.

As it relates to your best deal ever promotion, obviously, it's part of your renowned value strategy, and it's proven to be successful. And I think the main question that we get from the investment community is how do you ensure that you aren't training the consumer to rely on that price point or that deal for times when you aren't running it, considering it is the best deal ever. And a follow-up to that is just -- can you talk about the economics of this for franchisees? I mean, clearly, we can see your company on margins. It didn't have a big impact on COGS margins. So just curious if there's any other tidbits you can add on the economics of price Best Deal Ever.

Yes. Sure, Brian. I'll take economics first, and then we'll go into Best Deal Ever. I mean what -- the best thing I can tell you about the economics is we're on with Best Deal Ever longer than we originally intended because our franchisees called us and told us that they want to continue to lean in because this is driving business in their stores, and it's driving profitable business. And so I think that even beyond numbers speaks to what it's doing in our stores.

And then when you think of Best Deal Ever, this is just part of what we've got in our arsenal, both on renowned value. We've got that. We've got boost weeks. We've got emergency pizza carryout tips, all of these things we come up with new every year as a way to kind of reinvent value. But in a way that's truly ownable. And then what we'll do is we'll continue to mix this the renowned value with the most delicious food aspects. And so you're seeing that actually play out right now on air with the launch of the new products going on at [indiscernible] at Best Deal Ever.

The other thing that's really interesting about Best Deal Ever, yes, it is a great price point. But the amazing thing is when you talk to consumers, when they're able to build any pizza, they want to build, they come and their takeaway is not only that it's a good price, but they actually think the food taste even better -- and so this is not just a value-driven promotion. It's a most delicious food promotion, and we'll continue to weigh that with all the other strong things that we've got on our calendar in our arsenal for the future.

And our next question comes from the line of David Tarantino with Baird.

Russell, I think you mentioned in your prepared remarks your confidence in delivering 3% comps in 2026 and beyond. And a common narrative on Domino's is that this year had a lot of sales drivers that are going to be tough to lap. So I just wanted to ask you to maybe explain your thought process on how the next few years could evolve and why you're so confident that 3% is the right number going forward?

Yes. Thanks a lot for the question. I think some of the reason for the question is maybe we run our business a little bit different than other restaurants. This is not a company that does a lot of limited time offers. And so when we launch a product, we launch it because we know it's good enough to stay on the menu and we know it can build over time. And that's for menu items and value items. As an example is our loyalty program. We relaunched our loyalty program in '23. It was bigger in '24 than it was in '23 and it will be bigger in '25 than it will be in '24. And David, I think that's the approach to some of these other ones. I just talked earlier about aggregators and how, over time, we're going to get to our fair share, but we're not there yet. So it's not like we launched and hit our maximum for aggregators, for stuff trust, for loyalty for any of these things. What happens is they become part of our base for our future where we continue to come back to them and grow and then add things on top of that. If this was an LTO business, then I think people would need to worry because you're launching something and you're taking away and you got to build on it. This is part of our base and part of our growth moving forward.

Our next question comes from Gregory Francfort with Guggenheim.

Russel, I just wanted to ask maybe going back to Sandeep. The $9.99 price point is a couple of bucks higher than some of your existing value programs. And how did customers use $9.99 versus the other 2 major platforms? And is there a possibility that you would maybe more permanently shift people shift the customer up a couple of bucks, but give them more and maybe make it a more permanent piece of the menu?

Yes, Greg, I -- when I explained what we're doing with best deal ever, sometimes, I -- my simple explanation is like opening up an ice cream store. If depending on your preference, your first flavor is probably either going to be chocolate or vanilla, and then the other one is going to come in and then maybe your strawberry. You're not going to do a vanilla I know that French finalize your second flavor. And that's kind of what we're doing with our deals right now. The mix and match at $6.99, those are medium pizzas. And other items are available on the menu sandwiches, pastas salads, all those types of things. The large customers is like that chocolate ice cream added to the vanilla. We're going after somebody else. We're going after someone who may not want all that food could be a smaller eating occasion and is willing to pay a little bit more for what they want. I think this is a really important point. And maybe we can address that later as well.

I think one of the reasons, Domino's, we had the quarter we had is, yes, Sandeep talked about their pressures right out there in QSRs today. And one of them is economic, but I think the other is what is being offered and not being offered by restaurants out there. I think consumers are looking at deals and saying, well, this is a deal you want to give me. This is not the deal I want -- and with us delever, we're giving them the deal they want because they can create any pizza they want. So these 2 deals, mix and match and Best Deal Ever were complementary to each other, which is, I think, why we got the quarter that we got.

Our next question comes from Danilo Gargiulo with Bernstein.

Great. Russell, a very quick clarification and then a question. So the clarification is you mentioned that you have not reached the maximum along some of the innovations that you had launched. And so I was wondering if you have already reached the same 15% sales mix on the staff craft piece, given that it's been out for almost 6 months now. And if not, are you planning to do any tweaks to the go-to-market or product to be able to reach that 15%? And then the real question is, you were talking about short value, right, and renown value. And we've seen some peers being fairly successful in launching the 6-inch personal pizza at a very sharp price points, capturing individual consumers, growing launch day parts and what not. So this is 1 aspect that is still not available on your menu. So is there a strategic rationale like your real estate margin sustainability and whatnot that could present or that has presented Domino's from launching it.

Yes. Thanks a lot, Danilo. We had really high expectations for Stuff crust, both from a mix, bringing in consumers new consumers and also operationally from our franchisees. And those high expectations were met both during launch and since then, I've got actually a fun statistics. I'll throw out. It will be interesting to see what projections are on this one. But if you -- if we -- to give you a sense of how much stuffed crust we sold is, if you took all the cheeses that are in the stuff cross, that string cheese and you line them up next to each other, you would wrap around the earth and still have a lot left over. So we'll see what that means that model, if I'm not going to tell you it's the 15% that you asked or not. But I'll tell you, we were really happy with this launch. We're absolutely going to come back and talk to it in the future.

As far as renowned value in the individual pizzas, we've got a lot of items right now that are for individuals that are on our mix and match. We've got sandwiches and pastas and salads and chicken and all those pieces. When we decide what we promote, Danilo, we make decisions based on the numbers and what it's going to deliver. And these smaller kind of lunch single person, they are opportunities, but the opportunities we have that we put our money behind the lease right now are much bigger than that, we think. And that's why you're seeing some of the results that you're seeing in our business. So we've got the options there, but we're putting more of our money, we're kind of pouring gas on the fire, where it's burning.

And our next question comes from the line of John Ivankoe with JPMorgan.

Obviously pushes and pulls in terms of franchise economics. And your underlying return on investment for the aggregate units in the U.S. were obviously quite strong. But my question is really around U.S. unit development over the next several years, ending the quarter at around 7,100 units. I think 7,700 is the target in fiscal '28. Remind me on that and 8,500 in the TAM. So how are you thinking, I guess, firstly, about that 8,500, when can we get there. And maybe in terms of thinking about more near-term visibility, do we expect linear growth in '26, '27, '28, if there's a kind of an early indication about the pace of U.S. unit development given what you're seeing on a trade area by trade area basis.

John, it's Sandeep. So look, I think the franchise economics side, as you pointed out, our economics are very compelling. And I think the appetite from franchisees continues to be very strong, which is why the pipeline visibility this year, frankly, a little bit better than last year at the same time, and we're very confident of the 175 stores we're talking about for this year. And really, the algorithm was based on 175 plus a year through 2028. And we see a good line of visibility based on the economics that we're generating and the white space opportunities that we see, whether they're split stores or whether they're greenfield stores, to see that we have a good line of visibility to the 7,700-ish number on 2028.

In terms of the 8500, I'll go back to something that Russell said during the Investor Day, which is we've had long-term targets multiple times over the years, but somehow they start getting bigger and bigger over time. Why? Because what we take into consideration when we're coming up with those long-term markets is the current competitive environment. What has been happening consistently over the past decade is we've been taking share consistently competitor stores are closing.

We are opening up stores and actually then opens up even more opportunity for us to open up even more stores around what the stores we're opening it. So that 8,500 is a perspective based on where we were in 2023, 2 years on, you know what's been happening. We gained a couple of points of share, number of competitor stores have closed. That is expected to continue happening over the remaining few years of the Hungry for MORE time frame of 2028 and probably beyond. And so that's how we look at the full potential number of stores, and I think it evolves over time, and we feel very bullish about.

Yes. I'll just -- just kind of [indiscernible] builds Sandeep on what I was talking about before is even at a time where maybe restaurant traffic is pressured. That's actually good for Domino's. One is we know we can provide value to our customers when other folks can. But we think we're going to emerge from that stronger and probably our competitors weaker, which is what why that opens up, this is a long-term game for us, and we get excited about that. I think I'll add just to add to John's question, what makes me excited about our builds this year is we broaden our builder base. And so we've got a lot of smaller franchisees who are now adding to that base. So we have more people than we did prior years, building stores, which just talks about not only the health of our business, kind of broad-based, but our ability to handle when you got more people opening, it's easier to hit those store numbers.

And our next question comes from the line of Lauren Silberman with Deutsche Bank.

I have a 2-part question. Just starting on the consumer environment, you guys have been calling out the macro challenges with the consumer since the back half of '24, which we've seen throughout the industry. It sounds like it's incrementally worse. What do you think is driving that weakness more recently in restaurants just broadly? And then the follow on to that is just help level set 4Q expectations, if the macro remains as challenging as you've seen to start the quarter, is 4Q coming in below a 3% comp. Just trying to understand how significant the macro detail is?

Yes. So I think your question is really good, Lauren, and I think your key on what we've been talking about that really speaking, we saw the macro get really tough starting around the back half of last year in 2024, starting in really in Q3. And I think as we kind of came out of '24 and built our expectations for our base expectations were going to be tough macro. And that's why we've been talking about a tough macro is something we've been paying attention to all along. And so far this year, the macro really has paced as we expected it to in the first 3 quarters. The -- what we're really pointing out to is in the fourth quarter, we started seeing a slowing across the restaurant industry broadly relative to where Q3 was. And we're pointing it out. And look, I mean, if it intensifies even further, knowing that we're up against a tough macro environment last year. That could put pressure on our full year same-store sales number. So that's been realistic about it. But what we have is a slate of initiatives where we can control our destiny with those initiatives, but the macro, if it gets incrementally worse could be a pressure.

And I'd just add to that, kind of repeating what I said before, maybe in a different way is that short-term category pressure leads to long-term opportunity for us and short-term share growth. Thanks, Lauren.

Our next question comes from Peter Saleh with BTIG.

Great. Maybe I just wanted to ask a big picture on the pizza category. I think the pizza category was -- you guys were commenting that it was about flat for the first half of the year and now seems to be up before maybe weakening a little bit or the entire industry weakening in the fourth quarter I was hoping you could give us a little bit more color maybe in the third quarter, that acceleration, what you're seeing by maybe income cohorts, geographies, dayparts, just trying to understand maybe what changed? Or kind of where the acceleration is coming from in 3Q?

Yes. The income cohort pressure on the lower income customers had been seen kind of throughout restaurants, what I think, speaks to the kind of renowned value we have out there is we actually were up amongst all income groups for the quarter, and that's our second quarter in a row where we're up against the lower-income customers. So no matter what pressures out there, we seem to be breaking the trend.

And Pete, what I'll add is you rightly pointed out that we're now at 1% year-to-date, and there was an acceleration in the category a little bit compared to the first half of the year. And really, this gets us very close to our 1% to 2% historical growth rate. So the pizza category is continuing to grow kind of in the range of what we expected when we set out the hungry for more algorithm and our plans are constructed around that. So I just -- I think that was an important point to make because a lot of some of the questions I was getting was is the pizza category declining, and it's not true. I mean it's up slightly up 1%, which is close to our history.

Our next question comes from Chris O'Cull with Stifel.

This is Patrick on for Chris. My question was on carryout. I mean you had a nice sequential pickup in the comp. The 2-year stack was really healthy this quarter. I was curious if you were able to just disaggregate where that growth was coming from? And how much is higher frequency versus new customer acquisition. But additionally, I know historically, you said that there hasn't really been much crossover between carryout and delivery. And just given some of the broader softness in the environment, especially that you're seeing at the beginning of the fourth quarter, I mean, is there any evidence that some delivery customers, maybe even on the lower end of the income spectrum for that channel may be increasingly opting for carryout?

Yes. So I think, look, on the carrier business, we're just really excited about where the momentum is taking our business and we even talked about it on the last call when we had, I think, [ 58 ] memory serves me right on same-store sales. And now we have an [ 87 ], fantastic. And -- but the drivers of carryout were everything that we talked about in the prepared remarks, best deal ever was a huge factor. Parmesan Stuffed Crust is a huge factor. The compounding impact on the loyalty program that we talked about in the last call continues to be a factor. We -- Russel just talked about the fact that our loyalty database continues to build upon itself. That's the compounding impact that you're seeing so clearly on the carryout business. And look, we always look at that crossover between carryout and delivery. And we really haven't seen a shift on that crossover somewhere in the mid-teens. And so I think as far as we're concerned, we're getting off an incremental customer for the most part and building their frequency behind all the initiatives that we have.

Yes. And that carryout number is more of a share growth within carryout than it is taking folks from delivery to carry out. I think also, Sandeep talked about our initiatives, but you'll remember, for example, when we talked about the relaunch of loyalty, there was there was intent, there was purpose behind that. We did the program because the original program that was launched in 2015, was more of a delivery program was more of a program for delivery customers who are high-frequency customers, higher ticket customers. And so a lot of the growth we're seeing is because of the changes we made in the loyalty program as well as best Deal Ever and Stuffed.

Our next question comes from Andrew Charles with TD Cowen.

I was wondering if you could help us understand your confidence in the compounding impact of aggregators in 2026 as it's unclear in the 2.5% delivery same-store sales this quarter that you're seeing a second year of growth within Uber sales?

Yes. The Uber sales are absolutely within our expectations. We're now fully on with DoorDash in Q3. And so we're just getting started to Q4 into 2026. We expect aggregators to continue to grow. I see no reason, Andrew, why if we are 1 out of every 3 pizza deliveries off aggregators why we can't be that on because what works on these platforms is what works on -- off the platforms, which is scale, price kind of delivery times and location. We own the delivery experience there. So we've got a lot of confidence and a lot of room to grow over the last -- over the next couple of years. also makes you realize that a lot of what you saw at least in this quarter with the positive delivery number, while certainly aggregators were a piece of it, the 2 biggest things we're kind of -- I hate using the word self-help, but call it self-inspired initiatives in Best Deal Ever and Stuffed Crust. So I love the health at which we grew our delivery business this quarter.

And Andrew, I'm just going to point out something that we've talked about previously, to Russell's point, Uber is tracking where we expected it to, and we're very happy with that. But if you look at the cadence with which Uber built last year, it took time, it kind of steadily built over the course of the year. And this is the first quarter -- first full quarter that we've been on DoorDash. So it's going to slowly build over time. And I think that's why we expect that compounding impact to move all the way through 2026 and we're going to have even more time on Uber by bed time in addition to DoorDash, getting to a point where it's fully annualized as well. So we feel really good about the aggregator business, and we really want to manage the delivery business as 1 whole understanding that there's going to be [indiscernible]

Yes. And Andrew, back to the question from earlier, we're not going to -- we're going to price competitively, but we're not going to be irrational in pricing. And so we're going to grow at a steady rate on this channel. And I think I know to compete here in the long term in a sustainable way, you have to offer discounts that you can sustain. And we can absolutely do that.

Our next question comes from [ Christine Cho ] with Goldman Sachs.

So really excited to hear about your first brand refresh in 13 years. Could you walk us through some of your major considerations here? What's specifically triggered the decision that now is the right time? And are you able to share kind of any additional color related to time line, required investments and how it will be split between you and your franchisees.

Yes, Christine, thanks. The last time we did the brand refresh 13 years ago, I was the Chief Marketing Officer. And I can just say I'm jealous at what Kate Trimble and the team have done with this brand refresh. They've just really taken it to the next level. And it's really -- it was kind of inspired by our Hungry For More strategy and what we saw that we were doing really well, which is driving renowned value we are in Huge For More. And what we saw that we had a little bit more opportunity to do, which is to drive perceptions, not actual, but perceptions around our deliciousness. And so what you'll see that the team did is kind of reinvent ourselves from -- with our color palette, food photography that we've just never had before and doing everything we can to drive deliciousness. The research that we have shows that there is not a brand out there in restaurants that does both deliciousness and value very well. And we know that if we can do that, we're in territory all by ourselves. And then just at the end of the day, when you realize that the middle of your name Domino's has -- you also realize you hit the jackpot. And so this is really a culmination of how we promote, which was a strategy coming to life in something that consumers can hear, can see and taste every day.

Our next question comes from Brian Harbor with Morgan Stanley.

Maybe just your comments about some of the pressures picking up more recently, last 4 or 6 weeks or whatever. Is there any texture you'd add to that as you look at your own business, whether it's certain customer groups? Any differences delivery versus carryout or third-party delivery. Could you expand on that a bit?

Yes. So Brian, I think -- look, the comments that we made about what we've seen across the restaurant industry were really broad and intended to be what we're seeing from a macro perspective and certainly a sequential slowing. I think we typically don't talk about current quarter trends, and we're not going to do that on the call over here. But we're just pointing out that there has been an intensifying of the macro environment. And that's just a factor that's out there that we got to keep monitoring we -- our initiatives won't change. They're going to be what they were planned to be, but it's -- that's pretty much where we are.

And I realize I didn't answer the second part of Christine's question from before on how the costs are split. All of the rollout for the new campaign is funded by our national advertising fund, which is a 6% fee that our franchisees pay in. So it's fully funded by them.

Our next question comes from Alex Slagle with Jefferies.

Question on your expectations for the balance between the carryout growth you're seeing the delivery growth and then also between traffic and check and just how has this played out relative to your expectations and whether you see this balancing out a bit more as you head into 4Q or '26.

Yes, Alex, I think we've talked about this from the beginning of the year, and this is the year that we expect to see balanced comp growth between ticket as well as order count. Clearly, we're doing things like Best Deal Ever in addition to aggregators that actually are beneficial to order count. We're doing things like Parmesan Stuffed Crust, which are beneficial ticket with a higher price point. So there's a good balance that's out there. And I think in terms of delivery and carryout, we expect to be growing both. But the key over here is we're not going to show our cards on exactly how much we're going to grow each because some of the initiatives maybe started to 1 channel versus the other, and we don't want to tip our hand to our competitors. But overall, there's going to be a whole very balanced approach to how we think this through over time. whether it's in Q4 or beyond in 2026.

Our next question comes from Sara Senatore with Bank of America.

[indiscernible] on for Sarah. Just wanted to ask a quick question around DoorDash. I know it's only been 1 full quarter. But when you're looking at incrementality, is that still around that 50% range that you were anticipating previously? And do you see any real distinction so far between the DASH and the Uber Eats customer? And that will do it.

Yes. We're -- obviously, it's early in the game, and we feel pretty confident on the 50% incrementality number. There's -- the differences that we're seeing are ones that we expected going in. Uber tends to be a little bit more urban, DoorDash a little bit more rural and a little higher income on Uber than DoorDash. But obviously, DoorDash is bigger than Uber. So we'd expect more volume to come through that channel over time.

Our next question comes from Jeff Bernstein with Barclays.

Great. Just a question looking outside the U.S. as we close 2025 here. Just wondering if you have any initial thoughts that you can share on your confidence in reaccelerating that international unit growth, I think, in '24 and now in '25, you're talking about maybe 615 units net, which is just sub 4% growth I know that's below your long-term [ 975 ] net annually. And I think DPE is seemingly the greatest headwind. So any early color as we assume new unit growth visibility is probably better than comp. So I assume there's some at least idea as to where that directionally could go next year versus this year.

Yes. Maybe I'll start off macro and then Sandeep feel free to add. I mean, yes, you're certainly right. We are working with DPE right now to drive sales, particularly in France and Japan, but throughout their markets because that drives profitability and sales and profitability we get store growth. And so as that continues to go and as they continue to get more confidence, we'll have some more visibility into their growth. But I think through all of this, what I want to make sure I point out is that the 2 markets that we think are going to be the majority contributor to our store growth moving forward. Japan -- I'm sorry, China and India, are just doing amazing. I mean, China last year, 240 stores, they talk about being on target for 300 this year. And so the place that we expect a lot of our future growth right now is strong.

Yes. And I'll just probably add a couple of points to that. I think Russel just mentioned China. I think India has got a different fiscal calendar, but it's it's about 250 stores is what they're expecting for their fiscal calendar. But if you think about what's really happened in '25, we really had been -- have been pressured by DPE store closures, which are around 200 stores that they've closed in the first quarter. And I think what we are saying is, from what we've understood from DPE to this point, most of the store closures should be behind us. assuming that we don't have any further deceleration in same-store sales trends.

But I think on a going-forward basis, we need to make sure that we have good visibility to the potential paybacks from new store openings to really understand what the flex on that is going to be for DPE, and they're working on it. But I think overall, we feel that everything outside of DPE is tracking the plans. And so both in '25 as well as in '26, and that continues to be our expectation.

Our next question comes from Andrew Strelzik with BMO Capital Markets.

I wanted to ask about the brand refresh -- and in particular, there was a comment in the announcement about defining how Domino's launches bolder menu innovation. So the question is, are you thinking about innovation opportunities differently moving forward? And how are you thinking about the brand refresh and amplifying the impact of innovation moving forward?

Yes. No, I think that's a great question. One of the things that we had been stressing since -- with the original relaunch in 2013 was the diversity of all of our menu items, right? We launched mixed and match and we had all these things that you could get for what started at $5.99, it would became $6.99. And we became very retail-oriented in the price points, and frankly, the product. It was just kind of little -- a lot of show and tell us, here's what we have for $6.99. It was kind of flat. And what you'll see now, and I think you're seeing this with Breadbite's launch is a real focus on the deliciousness of the food of the food that we're talking about. People know a little bit more about our menu. We have a new redesigned website now that helps them explore it a lot better. And so the best thing to drive them to buy Domino's in addition to renowned value is just delicious product. And so the new campaign really focuses on just that.

Our next question comes from Todd Brooks with the Benchmark Company.

On Best Deal Ever, Russel, you talked about how the franchisees were so pleased that they look to extend the program, and that was granted that it's been a successful driver of share within the category. And then you and Sandeep both outlined a tough macro. I just wanted to ask, as you look to Q4 and other initiatives that have been planned, the ability to overlay this type of value that's resonating with the consumer and was going to be a tougher macro environment? Is this something that could be extended further?

Thanks, I mean you bring up a great point, and I'd make even take a step back and say, we've got a arsenal now of value, whether it's best deliver boost weeks carry out tips, emergency pizza that we could bring at any time, and they've already got recognition around the country. We're not starting from scratch. And so that gives us optionality -- that said, we've built our Q4. We obviously never give forward-looking information on what that is. But we feel really good about the quarter. Obviously, we've started with Best Deal Ever, and you'll see us leaning into all aspects of Hungary for more in Q4.

And our final question comes from Zach Fadem with Wells Fargo.

Can you talk about the metrics you look at internally to measure the success of a promotion -- and in light of the environment today and elevated industry discounting, curious how your promotional success has evolved better or worse as industry promo steps up?

Yes. That's a great question. Maybe I'll answer it a couple of ways. One is, I think we're really unique in that the discounts we're offering during these tougher macro times, are off items that people actually want. A lot of what we're hearing now are the discounts I'm getting out there are not on the kind of the main item that I want. How we determine what we'll put on TV or on the website, Zach, is we got a pretty good formula for success history here, which is essentially, we know if we can drive profitable order counts, that works to drive franchisee profitability. Short-term gains in ticket at the sacrifice of order count, once your pricing is in the right realm, are not sustainable. And that's what we're seeing now.

I mean if you just looked at Best Deal Ever and said, hey, are you going to get the same volume that you would do on non-best Deal Ever, then you'd say, oh, I'm not going to do that because we're not putting enough dollars in the bank. But something like Best Deal Ever, we know ahead of time from the research what it's going to drive. And so we could be a little bit more aggressive on the price point because we always tell our franchisees, we put dollars in the bank, not for sense.

And I want to add 1 thing to what Russel just said, absolutely, the lagging indicator is going to be franchise economics and profitability for all the reasons you explained. But really, the leading indicator of that is compounding frequency. If we aren't seeing compounding frequency across our customer base, the likelihood of actually building up into that franchisee profitability is going to be more difficult to achieve. So that's something that I've been actually watching continuously happening since we lost Hungary for more. And I think the loyalty program ends up being the perfect accelerator for all of that to happen.

Yes. I think the idea of looking at order counts and frequency, like Sandeep said, is there a great way not to just look at our business, but to look at all restaurant businesses. Order counts are key to sustained success.

Thank you, Zach. That was our last question of the call. I want to thank you all for joining our call today, and we look forward to speaking to you all again soon. You may now disconnect.