Hello everyone, and thank you for joining the Domino's Pizza Group Q3 call. My name is Becky, and I'll be your operator today. During the presentation, you can register a question by pressing star followed by one on your keypad. If you change your mind, please press star followed by two. I will now hand over to your host, Andrew Rennie, CEO of Domino's, to begin. Please go ahead.
Thank you very much. Thanks for everybody for joining the call this morning for our Q3 statement update. I'm joined by Edward Jamieson, our CFO, and Will McLaren, our Head of IR. I'm just going to give a brief overview and statement of the release that we've sent out this morning, then we'll do Q&A, the normal drill. So first of all, as you can see, we have really good, great momentum in the business, which really reflects all the hard work of our franchisees and our 38,000-odd team members, really focusing on customers, focusing on customer service, focusing on value for our customers. And the good thing is that the customers are rewarding us with their patronage, and we're accelerating growth in delivery orders and return to positive like-for-like sales.
The positive training momentum has continued into Q4, as you'll see, because I'm sure some people thought that maybe the euro had an effect on the Q3 results, but it was only a couple of weeks' worth. It's had a very small impact, to be fair. Q3 total orders were up 3.5%, great strengthening in delivery orders of 6.6%, which I'm really proud about, and if you think about the fact that our franchisees really started going after delivery service after our rally back in May, and ever since then, they've really been focused on making sure that our customers get amazing service, so they've done a fantastic job. Collection orders are down a little bit. There's also a little bit of that is coming through from some delivery customers moving across the delivery because of the value we're offering.
But we remain focused on collection, and we think that we will grow that again. Again, they've had a big step up post the COVID years, so we don't think there's an issue there. We think that's actually still an opportunity. Total system sales up 3%, a big step up from the first half. And as we said back at the start of the year, that it was going to be a year of two halves. First half was going to be tougher, second half going to be much easier. That certainly has been the case and has played through. Like-for-like's are up 0.7%. The reason that's not up more is because we're consistently offering greater value to our customers, consistent value, particularly to our delivery customers. Therefore, we're getting more order count growth, which is what we want.
We want to bank customers this year because we know with what's coming towards next year is that there'll have to be a better price taken. But we've actually been able to bank the customers before that's happened, unlike a lot of others. So we're very proud of that. We're focused on growing our like-for-like in a sustainable way. And I think that's the key word is sustainable here, driven by order count growth, not pricing, meaning lower ticket prices for customers and sustainable like-for-like sales growth driven by volume. So real growth, real order count growth. Execution of key initiatives. We're really focused on value, value for our customers, our weeknight steal, 8-10-12, our EURO 4 lunch, just a few of those offers.
You've got to back that up with great service because I've always said that no matter what price you sell the pizza for, if it arrives cold and late, it's really irrelevant what you pay for the product. Our franchisees really are doing great work. If you look at last week, which is typically one of the toughest weeks from a delivery point of view with Halloween, etc., the franchisees absolutely whacked it out of the park again with service. I'm so proud of what they've done. Really, really impressed with, I was just talking to the team this morning, now at 9.5 million apps. Really got to make sure that we focus on getting to our goal of 10 million app customers in the next sort of three to six months.
I think that's important because that becomes our own media channel as well, not only our own channel for ordering, but also being able to communicate with customers at no cost. So I think that's also a really, really powerful sort of bit of infrastructure we have there inside our own ecosystem. 34 new store openings. This is probably one area I'm a little bit annoyed at. We've certainly had some challenges. Some of them are landlord-related, sometimes utility-related, but it's the world we live in, unfortunately. The good news is we're still going to do somewhere between 50 and 60. We've got a bunch of stores that are under construction now, and it doesn't change our outlook on our store targets. We will hit our 1,400 store next year, which I think is a huge milestone.
When you think about the size of our business in the U.K., and it's going to be in our 40th year, which I think is. You look at the success this brand has enjoyed for 40 years, consistently growing. I keep coming back to that word, that sustainability and consistency, and we really want to set the business up for that next 30, 40 years of growth as well. So positive trading momentum has also continued. I think that's also important in Q4 with 5.8% in the first five weeks. So we're really proud of that, that it's not just when it's talking about a quarter here, we're talking about momentum that runs through the whole half. All this means our full year expectations are unchanged. We've had constructive discussions continued with our franchisees, with the MOU, where we feel like we're getting close there.
So we'll update you as more comes to hand. But certainly, the discussions are in a good place. It's an uncertain environment, right? There's no doubt that there's lots of different macro things coming our way. But I really feel that we're probably one of the best-placed brands to deal with these macro changes, A, because our business has been, in 40 years, has been through many of these things before. I personally have been through these types of challenges before in many other countries. And I think given where the franchisee's profitability is, which is up again on last year, even after rolling over the large National Living Wage increase this year, which actually was greater than the one that's coming next year. So we do have the ability to roll these things quite convincingly and still grow customer counts. So I feel very good about that.
We continue to assess additional value-enhancing opportunities to build a larger, more cash-generative business, which delivers strong and consistent returns. I'll look forward to updating shareholders on our future strategic progress in the full year, unless we have anything else to sort of update between now and then. With that, I'd like to throw over to Q&A. I'm sure there's a few questions out there, so over to the floor.
Thank you. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question is from Douglas Jack from Peel Hunt. Douglas, your line is now open. Please go ahead.
Yeah, good morning. Just a couple of questions from me at the moment, if that's all right. The first one is just in terms of the budget, and well, I suppose two parts to it. The minimum wage, living wage increase, and the employer's NI, obviously doesn't affect you as much as it will affect the franchisees, but are there any views about how it might affect them versus their competition going forward from April next year? That was the first one, and the second one is just on costs, other costs you have, and in particular, cheese price and what we're looking at in terms of that environment at the moment. Thank you.
Yeah, thanks, Douglas. Yeah, look, we don't think of it as, well, it's only hurt the franchisees on us. We think of it as we're one family. So whatever hurts them, hurts us as well, right? So we think of it as one solution. The good thing is, as I said before, our franchisees are incredible, right? They've been through this many, many times. Most of them have been around decades. And the good news is that we had to roll over the National Living Wage this year, which was actually a greater number than what it is next year, right? So we've been able to successfully do that and still improve franchisee profits by EURO 5,000-8,000 by the end of this year, we believe. So there's good evidence there that we know how to do this.
And we've done an environment where we've actually taken less price, and we've actually driven more customer growth. So that's the first big tip is that we've done this successfully this year. Next year, obviously, is a bit more challenging. Why? Because we don't have the rebasing of food that we had this year, which helped that process. We do have cheese going up next year. There are some other things slightly coming down, but it's a net increase next year for sure. The reason why I feel good about it is we have so many levers we can pull within our toolbox, if you like, particularly through our digital environment, particularly through the way that we can talk to customers through selection, through lunch, through delivery. And I think the trick will be just staying consistent with our messaging.
I can't disclose all the things we're working on, but I can assure you the team have already got a few different scenarios of things we will do, and we'll be discussing those with the franchisees in the next few days, a few weeks, and we've got plenty of time to organize ourselves for that. You are correct in the fact that I think we're better placed in our competition to deal with simply because of the volumes that we have, the profitability that we have, the balance sheet that we have compared to our competition, so I think we'll be a net beneficiary. I also think that the customer, based on my previous experience in other parts of the world, is that the core customer of ours will have more money in their pockets, and we typically see that flow through to us in terms of sales.
So I see this as an opportunity to run at it and be counterintuitive to what others will do because I've seen these mistakes made before. So I feel like we're well placed. Are we taking it lightly? No. We're taking it very seriously. But I can assure you that our franchisees are equally as focused as we are as working as one team to knock this out of the park again next year like we have this year. I hope that answers your questions, Doug.
No, that's perfect. Thank you very much.
You're welcome.
Thank you. Our next question is from Glen Brown from Van Berkom. Your line is now open. Please go ahead.
Good day, Glen.
Hi. Hi. It's Glen over here. Can you just talk me through? You mentioned, obviously, that you're offering better value, and that's a key driver of the growth. But obviously, the headline prices in the quarter, I think, were up 2%. So can you just bring that to life for us a little bit more as to what do you mean by offering better value? And is this part and parcel of the franchisees partaking in more promotions, more marketing, or is it more to do with the mix of the products that people are buying? If you can just kind of just bring that to life for us a little bit more, it would be really helpful.
Yeah, sure.
And then just lastly, on kind of the, let's call it the demise of Papa John's or let's call it the market dislocation in some of your competitors, the budget is clearly an important inflection point in 2025, which may necessitate franchisees to push prices, etc. But can you just give us your view as to, considering how weak your competitors are, what is your big picture view of what could happen next year from a market share perspective? Because clearly, this could potentially drive a greater wedge between you and your competitors. Thanks.
Yeah, sure. Thanks, Wayne. So first of all, I think headline prices, our customers only spend 2% of their customers buy on our headline prices or on our menu pricing. So it's really quite irrelevant. What actually matters is what customers are buying in actuality. And the actuality is our things like our weeknight steal, our 8-10-12, the EURO 4 lunches, and a bunch of other deals, etc., that particularly through the app we can offer to our customers. Franchisees continue consistently to recognize and honor those and support those, right? Support those through their own local marketing, yes, and also through top-line marketing from the national level. And that consistency of that message has just continued to play through. Our customers are telling us now that they're seeing us as better value than they've seen since 2020. And I think that grows, right?
Consistency is so important here because, as you know, our customers are only buying on average once a quarter. So what we talk about and think about every single day for them is like, "I thought about that 13 weeks ago, 12 weeks ago." So the support from franchisees on making sure that we support those everyday high-quality offers are important, and that's what's been working. So that's the first point. Next point is, you're right. I think pretty well everyone will have to pay some price next year. There's no doubt about that. I think the lazy ones will take all of it in price, and that will hurt them. That's what I've seen in the past. They will have severe order count declines, and I think we'll be the beneficiary of that. We think we can be smart on that.
We will take some pricing for sure, but I think we'll be elegant and smart around that because there's so many different levers we can go with. And we think that'll place us well for order count growth, albeit maybe slightly smaller. It may not be. It may not be because others will be pushing them towards us. But certainly, the key underlying part of all this is great service. Because what will happen is people will start cutting back on staff, cutting back on delivery drivers. Service times will go out to 30, 40, 50 minutes, colder pizzas or products just in general. We're too disciplined to do that. And again, that'll push people back towards us. Any other countries I've been in where brands did this when this happened, those brands sort of ceased to exist sort of three or four years later.
So I wouldn't be surprised if that happens, particularly when they're coming from such a low base of sales per store and a very low base of profitability. It'll be very difficult. But I'm more focused on what we do and making sure that we get our franchisee profitability maintaining it at least, which will be a combination. There's about 12 different levers that we'll be pulling to achieve that. So I feel pretty confident about that. Did I miss any other points?
No.
Nothing that covered them?
Thanks, Wayne.
No, that's great. Thank you very much. Good update today.
Thank you.
Thank you. Our next question is from Hyein Jeon from UBS. Your line is now open. Please go ahead.
Hi. Hi. Thanks for taking my question. So my first one is on store openings. When you say you can go a bit into more detail on why the store openings is lower this year? Is this also for the whole market? And when you say you reach 1,400 by FY 2025, are you indicating towards the end of FY 2025 or somewhere within half one, Q2, something like that, for 1,400 stores?
Yeah.
Yeah.
My second question is on, sorry.
Sure.
Yeah. Second question is on just a bit more color on the loyalty program and Uber Eats rollout, so a digital side. Are you still expecting to roll out a loyalty program in FY 2025? And again, timing on that, is it beginning of the year, end of the year? And any more color on Uber Eats rollout contribution so far? Thank you.
Okay. So there's three questions there. So first of all, your question around store opening. So look, there's a myriad of things. There's no one reason, right? We've got sometimes landlords just not lending in terms of like the building might be falling down. And I'll give you an example. We've got a roof falling down, and one of the sites we're opening is supposed to open in a few weeks' time. And he'd like us to pay for it, and he wants us to take full liability for the apartments above the store. Now, we're not stupid, and we don't need to take stores for the sake of it, so we walked away from that site. Another one where there's an issue with the plumbing, like severe issues, going to take six months to fix.
You couldn't pick that until you got in and start buffing the floor up. Another one where we're waiting for electricity and gas to be connected, and there's slow planning. So sometimes these things can typically take 3 months, and all of a sudden, they're short of staff, and they take 6 months. So they're the sort of things that happen to us, unfortunately. I've seen this in every country in the world that I've worked in. Again, it doesn't change our long-term view. I mean, 10 stores, we've opened. I think we've opened 12 stores in one day in the UK before. So these things can swing around pretty quickly, but we feel good about picking those back up next year. And your point around next year about when do we open the 1,400 stores, look, I don't have that in front of me. It's sometime next year.
Again, because of the planning environment, something that could be planned to open in Q2 today may fall into Q3 next year. What I can say is the pipeline looks very good for next year. It's actually very healthy. We actually have quite a new team in place who are doing a fantastic job, one of the best teams I've seen, actually. And they're really gathering a body of steam for next year. So already the outlook for 2026 looks very healthy, which is why I feel so confident about the 1,400 store. But I can't tell you which quarter we'll open in. On loyalty, yeah, look, so far, I'm really happy with the results, the learning that we're getting. Every week, we're learning something new. Still early days. That's why it's a test phase.
We do feel like we'll go to a bigger version of it next year for sure. Exactly when, again, I can't tell you. Some stage next year. But it's more likely to be in the earlier half rather than the back half. But that could be Q2, towards the end of Q2. So let's say mid-year just to be conservative. But we're very encouraged by the numbers we've seen so far, that's for sure. So early days, but positive.
And then Uber Eats rollout.
Uber Eats are going really well. Really happy with the relationship there. Franchisees are embracing it. It's a win-win for both sides. So yeah, we feel really good about it and feel like it's contributing, and when you put it all together, I mean, Uber is still talking single-digit type numbers, right? Where it's not a major part of our business. We still drive our own apps. Still drive people to our own network. That still is the best ecosystem for us, but it's a nice addition. So we see it's an add-on, particularly in certain places. So I think hopefully that answers your questions, Hyein.
Yep. Got it. Thank you very much.
You're welcome.
Thank you. Our next question is from Richard Taylor from Barclays. Richard, your line is now open. Please go ahead.
Yeah. Morning, team. Can I just understand better, please, what's going on with like-for-like pricing? You're showing that the price is plus 2% overall year on year, but that's a total number, isn't it? So just trying to square the circle between the around 4% order growth and like-for-likes of about 1%, depending on whether we reported or comparable numbers. So that's the first question. The second question, clearly encouraging to see volumes up year on year, but can you help us understand whether they're up on a like-for-like basis? Again, there's been store growth. And just to understand how pleased you are with that performance with the context of a tougher macro backdrop, but also in terms of where you'd like the business to be overall? Thank you.
Sure. Richard, let me comment on that. So look, we're not breaking out our like-for-like volumes, so that's a change we've made earlier on this year. But what I would point out is, look, you can see that volume is back in growth on the total sales basis, and that's because we're focused on sustainably driving total sales and like-for-likes through volume. And if you think about it, that applies on a sort of mature estate as much on sort of new stores. So in terms of focus around sort of like-for-likes, I think the overall indicators patterns that you see in the total system sales, you can think about them similarly for like-for-likes.
If you're looking at a ticket that's slowing down, then that's because, again, we're providing better value to customers, which is why they're coming more often or more people are coming. So we're really focused on that order count growth rather than just putting the price up, which is actually masking declining order counts. So that's important to us. Does that answer your question, Richard?
Yeah. I just want to try to work out the overall impact of falling prices in some of the commodity items and what's happening on pricing. Because I realize that if prices are coming down for the franchisees, then it is all about volumes, clearly. But just trying to understand how much this is you focusing on volume versus maybe a more promotional environment driving people to put lower like-for-like prices through. That's really what I'm trying to understand better.
Yeah. Well, I think maybe you're overthinking it. At the end of the day, we just want more customers to order from us more often, and that's what they're doing, right? And yes, they might be spending a bit less because we're offering a better delivery deal, right? So 8-10-12, people are accessing that more than what they were a year ago, which means ipso facto that they may be spending less on that ticket, but they're coming more often. And all I want are customers to come more often, or I want new customers to come to us that haven't been coming to us in the past. And in an environment where commodities have come down, we've been able to do that and do that in a profitable way, particularly for our franchisees. Next year, the environment is different, right?
It's that you've got commodities slowly going upwards, you've got labor going upwards. So therefore, it's going to be a different environment. But we put ourselves in a great position to manage that for next year, and the early question, how do we feel about it? I feel bloody good about it, right? At the end of the day, I mean, an environment where people are showing like-for-likes, but actually, when you look underneath the cover, there actually is no order count growth. It's all pricing, right? So it's actually masking the fact that less people are coming to their business. We've got the opposite. We've got more people coming to our business, which is fantastic because you can't make more profits from customers you don't have, right? So I feel very good about it. I'm really proud of what the franchisees have done.
Don't forget, service plays a big part in this. Franchisees have really worked hard to make sure they're giving great service. I know to you guys, a minute delivery time, big bloody deal. But when you're doing over 50 million deliveries a year, saving a minute, which actually has come down two or three minutes over the last couple of years, is actually massive because every minute has an impact on customer repurchase intent, which has been shown globally. So yeah, that's not easy to do. We really feel proud about the numbers we run compared to others in the market. We're not talking a few minutes better than others. We're talking 10, 20 minutes better than others. So it's another reason why the moat around our business continues to get bigger.
And I think with the budget, that actually may lean into our favor because of our system and our structure we have, and therefore, our moat may get bigger, which is what I've seen in the past. So yeah, I hope that answers your question, Richard. If it doesn't, let's take it offline and have a more one-on-one if you'd like. I'm happy to sort of go deeper if you'd like.
That's great. Thanks for the color.
You're welcome.
Thank you. Our next question is from Richard Stuber from Deutsche Numis. Your line is now open. Please go ahead.
Hi. Good morning. Just one question for me now. In terms of your collection business, I think you were slightly sort of down in the Q3 . Could you say when you plan to return that collection to growth, and do you see sort of collection as a more competitive market than delivery, I guess, given the alternative value offerings from competitors like McDonald's and Greggs? Thank you.
Yeah. Thanks, Richard, from Deutsche Numis. I would say that there's a couple of reasons there, Richard. One is we haven't purposely gone harder in chasing collection. We think that we're against just being sustainable there and consistent in the messaging as being good for us. A portion of that are those customers coming into delivery, which we're happy about. So we have no problem with that. Is it a competitive environment in that collection value space? Yeah, definitely, right? There's no doubt that it is. But I don't think we've necessarily lost there. I think it's because we're not really putting massive focus or marketing dollars or aggressive pricing to try and get the customers across at this stage.
If we wanted to, and we may do a bit more of that next year, maybe one of the levers that we pulled at to help balance the ledger with labor costs, it's not hard to do, right? Being there, done that before many, many times, that's not a big issue. But I expect that probably by H2 next year, you'll see collection in the positive area. And I'd like to think that we can keep deliveries in the positive as well. The idea was having both positive because 90% of the time, they are a different customer. There is about a 10% overlap.
And I think you're seeing part of that 10% overlap has moved from collection to delivery because we've been offering that better delivery value than the past, which is why some of those collection customers have elected, and no wonder with the weather in this country, elected to go into delivery, which I fully get it. And we like it. So we're happy with that.
Great. Thank you.
Thanks, Richard.
Thank you. Just a reminder to ask a question. It is star followed by one. Our next question is from Ross Broadfoot from RBC. Ross, your line is now open. Please go ahead.
Morning, everyone. A couple of questions from me. Great to see the strong order growth in delivery. Can you comment on the extent to which that was driven by new customers? And second question, commentary on the new stores, I think implies a slightly greater focus on virgin stores rather than split. So what should we read into that? Thank you.
Yeah. Thanks, Ross. Two good questions, actually. Look, I would say, based on the last numbers I saw, it does fluctuate around a fair bit, but there's a fair chunk of a balance of increased frequency and returning customers and a balance of new customers, so it's a good, healthy amount of both, and we're seeing a reduction in churn. So therefore, because of the better delivery service, less people are churning, so they may be very, very happy. They're the sort of metrics I look at regularly, so that's that part there, and splits, not too much to read into it except for two things. One is new stores have great ROIs. They're very profitable very quickly, so franchisees do like going there. The other one is just availability of spaces.
You can't underestimate how hard it is to get an R1 in the right location rather than just taking any location. We're very specific about where we go. So quite often, it's just availability, the right location. I mean, some of our franchisees have waited five, six years for the right location to come along, and when it comes, you grab it. But it is a waiting game to get the right location. What I can say is the stores are opening, extremely happy with the sales. I mean, some of the stores, we had a store open on Monday night, did EURO 11,000 on a Monday night. I mean, quite incredible for a brand new store. So the quality of the openings have been very high. And again, franchisees are really doing a great job there.
Our own corporate network and our own corporate stores in Ireland, etc., are doing an exceptional job as well. So we're really seeing some fantastic numbers. And Shorecal is doing really well. And our franchisees over there, we'll probably have a record organic opening in Ireland this year, across the island of Ireland, which we'll be able to report in March. But yeah, I feel really confident about what's happening over there as well. So I think that answers your question.
Brilliant. Thanks, guys.
Thanks, Ross.
Thank you. We currently have no further questions, so I'll hand back to Andrew for closing remarks.
Yeah. Look, thanks for everyone for putting the time into coming out and chatting to us. I really appreciate it. I am proud of where we are. Look, we're in a long game here. This is not a for me, I don't like to think about quarter- by- quarter. What I like to think about is the next two years, six years, 10 years, to be fair, and it looks good, right? There's no mistake why this business has been around 40 years, and we're going to make sure we get around at least another 40, so yeah, it's been a team effort, and the franchisees and their 38,000 team members do an incredible job every day with these delivery times that underpins the rest of it, but I'm feeling great about the fact that customers are voting with their feet. That's most importantly.
Not that we're just taxing them more with more costs, but they're coming because they want to come to us for the great value and the great service. Thank you very much, and look forward to seeing you all again in March if I don't reach out before for some great reason. Thank you.
This concludes today's call. We appreciate your attendance. You may now disconnect your lines.