Domino’s reported a much improved quarter vs. Q1 with US comp-sales increasing by +3.4%, driven by mix (Parmesan Stuffed Crust Pizza), positive pricing (COGS increased +4.8%), and comp-transactions (+2.0%). Carryout comp-sales increased +5.8% and delivery, +1.5% with more households choosing the cheaper carryout option. The Parmesan Stuffed is a new item and CEO Russell Weiner said, “Customer praise for this product has been significantly higher than any of our recent product launches.” Weiner also said that Parmesan Stuffed attracted new households to the brand; Advan estimates that visitors-per-location increased +2.4% in the period. That increase would support management’s claim, but also more thriftiness as reflected by carryout’s higher growth rate. Q1 was also marked by bad weather which suppressed the shift to carryout, as well as overall comp-transactions. And so, the QoQ changes are filled with distortion, that said, comp-transactions improved by +460 bps which is far above Advan estimated visits-per-location of only +40bps. Adding to the distortions was the national launch of its DoorDash partnership, which will have been a contributor to the comp growth. DoorDash drivers typically pick up a batch of orders per Domino’s stop, but they typically don’t return to the Domino’s location like a Domino’s delivery driver. Weiner, “We continue to expect [the DoorDash partnership] to be a meaningful driver to our U.S. comp in the back half of the year.” Given the gap between the improvement in comp-transactions and Advan’s estimated visits, it appears that DoorDash was also a meaningful contributor to Q2’s results.

As for the consumer and the category, management reiterated that the consumer remains challenged and that $-value growth for the pizza-QSR category was flat, meaning that DPZ took market share. “Flat” also implies that fewer pies were consumed, which is share-of-stomach lost to other food categories (chicken), other retail categories (gas & convenience ), to the food-at-home channel , and potentially less overall calorie consumption (GLP-1s). Management didn’t address the GLP-1 topic . Separately, the competitive intensity within the category and for overall share-of-stomach is very high, as can be seen in the gap between COGS inflation (+4.8%) and average ticket growth (+1.4%), especially considering that Parmesan Stuffed is a $4 upcharge that contributed to the +1.4% growth. Company-store gross margin was down a meaningful -200 bps in the quarter; that’s a lot of discounts and loyalty rewards distributed to produce the sales and transactions growth, and the market share.