Good morning. I would like to welcome you all to the Domino's Pizza Group plc Q3 trading update. My name is Brica, and I will be your moderator for today's call. All lines are on mute for the presentation portion of the call today, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star then one on your telephone keypad. I would now like to pass the conference over to your host, Andrew Rennie, CEO of Domino's, to begin. Andrew, please go ahead.
Thank you very much. Good morning, everybody, and thanks for joining the conference call this morning to discuss Q3 results. As previously said, my name is Andrew, Chief Executive, and I'm joined today by Edward Jamieson, our Chief Financial Officer, and also Will MacLaren, our Head of Investor Relations. For this call, I'll give a summary of the statement we've released this morning, then I'll turn over to Q&A. Before I go into the details of the call, I'd like to give you some initial thoughts, as I've now been with DPG the last three months. As you all know, you know, I've been with this brand almost 30 years, next year it will be. You know, this.
As we say, "I've got pizza sauce in my veins." I must say I've really enjoyed being part of this business these last three months. It's clear to me that we have really do have a strong platform here. Franchisees, their teams, the leadership team, the teams that have been developed at DPG really are strong, and I must pay homage to those before me. They really have set this business up for growth and for success. I've been traveling around the U.K. now and Ireland for the last 100 days, visiting every franchisee. I've been down to the last two or three, which I hope to knock over in the next coming weeks. There are several points I'd like to focus on in the statement.
Firstly, our franchisees are performing well in, you know, uncertain times, as we know, and we're all benefiting from an aligned system. I really do feel that. Delivery times have continued to improve. GPS is now out in every store, and the franchisees are definitely excited about the future. And as you can see from our store growth, you know, sitting at 45, by 20 different franchisees, we are now very confident there will be over 60 stores this year. Not only have we opened more stores, but these stores are trading ahead of expectations.
As an example, one of our franchisees opened a store in a small village a couple of weeks ago, and after the first two weeks of trade, a testament to the brand, that store is still doing in excess of 2 times the national average in sales. So it really shows, you know, the power of this brand in places we haven't even got to yet. Secondly, our digital strategy is really powering ahead. In Q3, app orders as a percentage of online orders were 79.4, almost let's call it 80. 26-point increase on last year. App downloads are 73% higher, which is amazing, versus last year, and the number of active app customers reached 8.7 million. What's really important for us is moving those customers to that, our online app ecosystem.
That's an increase of 55% compared to last year. As I said before, our app is a key driver of our digital growth strategy because app customers yield higher, higher sales, higher average order frequency, and those are only compared to those who use the website. Our team has made great strides this year. We look forward to the benefits of the increased app penetration in the future years, which will allow us to do many more things that we haven't been able to do in the past. Now, what I would really like to do is I, I want to give a true 100-day update of my thoughts on the business and sort of looking forward, if you like, on the eleventh of December.
I think it's far too far away to wait till March, so I want to give a deeper, broader update on the initial outline of my thoughts of the first 100 days on the eleventh of December, which you'll all be invited to. So let me turn to the statement we released this morning. We've continued to grow sales with like-for-like at 3.7%. We've maintained our focus on providing value. Total system sales are up 5.5%. Q3 total orders were 16.7 million, down 1.2%. However, our total orders are up 1.5%. Collection orders were continuing to be strong. We're at 8.4%. Delivery orders were down, which is, you know, the general trend in the UK market due to softer demand.
Pleasingly, our total orders have returned to growth in Q4, up 1.2, with improved trajectory in delivery orders, despite a tough comp last year. While the market and consumer backdrop remains uncertain, we're making strong strategic progress, and we continue to expect this year's EBITDA, underlying EBITDA to be in the range of GBP 132-GBP 138. Thirdly, I'm really pleased with the growth of our collections. We continue to see a good opportunity to grow collections over the coming years, as they remain a low percentage of total orders compared to other Domino's systems globally. We're also bringing exciting menu innovation to our customers through fries, through wraps, and other various things, which will give us the ability to drive things like lunch, et cetera. Finally, we're moving to the Domino's Inc. agreement with Uber Eats.
That trial starts early in 2024, and we want to take a data-led trial, just like we did with Just Eat, to assess if we can bring Uber Eats on board, which is highly likely. As with Just Eat, all deliveries will be made by Domino's drivers, ensuring that we maintain our high standards of quality and service. So as you can see, we're continuing to make great strategic progress, sustainable growth. As we look forward into next year, we're seeing inflation stabilizing. Our focus will be on continued customer and order growth. In fact, I would say that my biggest focus next year is a organic customer growth. I met with the franchisees, had them all together a couple of weeks ago, and they walked away clearly with that in mind. That's my main focus for next year.
Along with a continued store count growth, which actually looks to accelerate even further into next year. We remain confident that our resilient asset-light business model will deliver further financial returns, and strategic progress will increase our returns to our shareholders. I've gone pretty quickly there because I know probably many of you have questions. You've already read the statement anyway, but I'd like to sort of, I suppose, finish off by saying this is that, you know, out of all the Domino's markets in the world... This is the market that I'm happiest to be running. You know, this, this is an incredible business, and I must say that I'm, I'm totally delighted to be running it. I truly am, and I see so much opportunity.
Yes, deliveries are down a bit, but strategically and tactically, that sort of fitted into the strategy that the team had when I came on board. So saving our powder dry for Q4, which is definitely working. So, and that's why guidance has been able to be maintained, because it was actually part of the budgeting process. So with that, I'll throw over to Q&A. I'm sure you've got questions. Thanks very much.
Thank you. If you would like to ask a question, please press star, then one on your telephone keypad. If you change your mind at any time, please press star, then two. We have the first question on the line from Darren O'Sullivan of Jefferies.
Good morning, all. Thanks for taking my questions. Firstly, are you able to provide any commentary on consumer behavior? Has there been any noticed change since the second quarter? Secondly, when can we expect the launch of the loyalty program in 2024? And are you able to provide any more details into what this might look like? Thanks.
Thanks, Darren. So first of all, I mean, it's pretty obvious, not just Domino's, but everyone, that delivery consumer is off a bit, there's no doubt about that. However, collection customers are up. I mean, we're still 7.1% up for the whole year. So look, there's no doubt, and I think the Bank of England's, you know, obviously doing this to slow inflation. They want consumers to be mindful of their spending, so the delivery customer is certainly feeling that more. And the value customer, the collection customer, is actually responding and coming more to us. So I think we're fitting in with the trend. As we look forward into next year, you see, utilities coming off, et cetera. We think that softening will actually release.
But we think it's more to do with how we spend our money, where we spend our money, where our focus is. So, from our point of view, we're on track with where we thought the consumer would be. And your next question was around loyalty. I don't want to promise when and how and what loyalty should look like because I don't want to flag it to my competitors. But more importantly, I want to change the focus a little bit about a loyalty program and focus more on frequency. I will be doing whatever I can to invest, to focus on, to drive consumer frequency. Now, it could be a loyalty program, and invariably will be, but there's lots of other things that play into frequency at the end of the day.
So yes, my teams are researching which loyalty program we're going to go to, but at the same time, I don't want to just jump into a loyalty program because, you know, people expect it to think it's gonna change the world. Because I've researched loyalty programs around the world, and quite often they can be quite expensive and might make it a short-term sugar hit. And I'm focused on driving long-term shareholder and franchisee success and profitability, so I don't want to rush there. So, we're researching, we're onto it, and we'll have more to update probably in March when we do our full year results on where we're gonna go with that.
I think just to add to Andrew's point, importantly, the e-commerce platform, which we've talked about, is the real sort of foundation, enables us to build, you know, products and features like loyalty and other initiatives is on track and expected to complete by the end of 2023, as we have previously flagged. So that gives us that foundation to be able to develop.
Correct. The platform will be in place to add loyalty or other mechanisms that we may add that will lift consumer frequency. I hope that answers your question, Darren.
Yes. Thank you, both.
Cheers.
Thank you. We now have Douglas Jack of Peel Hunt.
Yes, good morning. Yes, so I've got a couple of questions. The first one, really, in terms of tail starters, if you could just maybe talk a bit about national promotions, any activity there, in terms of past and hopefully near future. And then secondly, in terms of that, what you're seeing in terms of franchisee local store marketing. And then the second question was just about margins, and to what extent cheese prices and changing energy and fuel costs are supportive otherwise in terms of margins. Thanks.
Yeah. It was very hard to hear, but I'll try and have a crack at both. I think your first one was around national promotions, past and future. Look, I think talking about promotions really isn't something that's relevant to be fair. We're gonna. We'll always do promotions. They're an important part of innovation. They're an important part of bringing the consumer to us, sure. But strategically, long term, you know, it's actually what we do in the core part of the business. It's the basics, right? It's the focus on the value for the consumers, focus on the service for the consumers, focus on, you know, all those metrics that we're continually looking at. Promotions are a nice way to sort of help the consumer bring them to us, but they're not the be all and end all. We'll continue to have innovation.
We'll continue to work on new products. That's certainly an important thing. Things that we've launched, like the chocolate cinnamon doughballs, great product, great consumer retention. Fries have been good. Loaded Fries, which we're launching now with CX, we think will be quite nice. Well, they're all add-ons, right? They're little nice additions to our business that give us some yield. But at the end of the day, my focus is on the overall value to the consumer, right? And the value is provided not only by the price, the quality of the product, and the quality of the service. So that's what I'm really gonna focus on. And your other point was around margins and going looking forward. Look, definitely I think what everyone else is seeing, we're seeing the same thing.
We're seeing utility pricing coming down. We're seeing food inflation coming down. We see margins looking quite healthy for our franchisees and store-level profitability next year, without a doubt... 2024 looks good from where we're sitting. We're very positive on how it looks. And what's important for me is this year has been very important to make sure that franchisee profitability and health is in a good place, and we've got a good platform there, and it is in a good place, I think, to rebound into next year, to an even better place, which bodes well for more future store openings, which we're also seeing. So one thing leads to the next. So very positive on that front. I hope that answers your question.
Yeah, thanks. Just, just connected to that, obviously, the franchisees are expanding. Are they also investing in local store marketing as well, as much as before?
Yeah, they definitely are. Look, it's. You can't put a pin on it, 'cause some weeks, some months is higher and lower based on lots of different factors. But I would say on the whole, franchisees are investing in local store marketing where appropriate. And like ourselves, you know that Q3 is always the softest quarter of the whole year, and, you know, we have the saying, "You go fishing when the fish are biting." So you tend to sort of not overspend sometimes in Q3 and save it for Q4, because this is where all the rubber hits the road, and you get a much better bang for your buck with your marketing. So they're no different to us.
That's great. Thank you.
Thank you.
Thank you. We now have Richard Stuber of Numis on the line.
Hi, good morning. Three questions, please, if that's okay. The first one is, you gave some really helpful color on the new store openings, mentioning that one franchisee had sort of doubled the turnover of your average estate. Can you also, on that particular franchisee, talk about the address count for that one, and more generally, any sort of anecdotes about the average address counts on new store openings? The second question is, again, just to sort of clarify that point you just made now in terms of the profile of marketing spend, typically in Q4, is it as full a profile as you had last year? And the third question is, do you have any on when you think that delivery like-for-like will return to growth?
Thank you.
Yeah, good questions, Richard. First things first, your first point was around address count, et cetera. So that store I referred to only had 6,000 addresses. The average store count in the UK is 21,000, a bit over 21,000. And look, it's a varied patch on stores, right? Some stores are splits, and they're at 15,000. Some stores are splits, they're at 18,000. Some stores are virgin, they're at 6,000 or 7,000. It's a varied bag, so you can't draw conclusions from averages. But it certainly is... You know, when you see 6,000 addresses doing over double the national average, it just shows the strength of the brand, right?
That, that's what makes me so, so damn happy, is that when you do it right, people are calling out for this product, and we're still only in 85% of the households in the UK with our reach so far. So more opportunity there. Your next question was around-
Around the profile of marketing spend.
Marketing spend. Look, I would say it's a little bit hard to give a like-for-like there, because obviously you had the football last year, we had Just Eat while we had, et cetera. But I would say it's fairly similar to last year, because as Q3 is always a softer period anyway, anymore.
Yeah. I think the first point just to make on this, to remind everyone, is because. You know, that we spent across 2023, we spent more on marketing than we did in 2022. As you guys know, marketing is funded for us through a contribution of franchisees making a percentage of system sales, and as system sales grow, that puts more into the pot. So as we grow that fund, obviously it gives us significant benefit to scale. And then to just sort of, you know, echo Andrew's point, yes, our spend in Q4 marketing will be broadly similar to our spend in Q4 last year.
Your third question, Richard, about when do we expect delivery growth back to positive territory? Look, I think from what I'm seeing so far, I think definitely we should see that into Q4. Definitely into 2024, with the strategies that we're starting to pull together since I've been here now the last 100 days. So I feel a positive momentum going to Q4. And realistically, I think 2024 is when we'll see more of that. We'll apply more pressure into that growth again. To me, this year was more about making sure the franchisee profitability health was in a good place. That was the first priority.
That's great. Thank you very much.
Thanks, Richard.
Thank you. If you would like to ask any further questions today, please press Star and One on your telephone keypad now. We have had no further questions. I would like to hand it back to the management team for any final closing remarks.
Well, first of all, thanks for joining today. I hope it was informative. As you saw, we're gonna give. I want to give my sort of broader view outlook on the business and the way forward on the eleventh of December. I hope you can all join. As I said, there's no other Domino's market in the world I'd rather be running by now. I really do feel very lucky to be, to be part of this team and this business. A lot of people have asked me, you know, "So what's, what's, what's really going on? What are the skeletons?" You know, and when they found out, and I, I can honestly say, you know, I've bloody loved every day, and I've only found good things, really good things.
I think particularly the franchisee base, their second generation, these guys have got their kids from 20 years of age to 35 years of age, that are hungry, that have grown up inside the Domino's business and want to grow. Makes me very, very motivated to grow this business. So I'm very excited and look forward to catching up with all of you soon.
Thank you. Again, today's call has now concluded. Please have a lovely rest of your day, and you may now disconnect your line.