Good morning. My name is Kelly, and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2015 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Ms. Liddell, you may begin your conference.
Thanks, Kelly. Good morning, everybody. You know the drill. We're going to start with some prepared remarks this morning and then open to Q&A. We do set this up for investors primarily. I would kindly ask the members of the press to be in a listen-only mode for the Q&A session, also to turn your attention to our safe harbor statement in the event that any forward-looking statements are made. With that, I would like to introduce our participants today. The first will be Mike Lawton, our Chief Financial Officer, then we'll follow up with Patrick Doyle, who is our CEO, he'll make some prepared remarks, then we'll open for Q&A. With that, Mike, you ready to go?
Thanks, Lynn Liddell. Good morning, everyone. This quarter, our positive momentum continued as we posted fantastic same-store sales in both our domestic and international businesses. We opened a significant number of new stores, our adjusted EPS grew 19.1% over the prior year quarter. We are pleased with this earnings growth, particularly in the face of some strong foreign exchange headwinds. Global retail sales, which are the total retail sales at franchise and company-owned stores worldwide, grew 10.4%. When we exclude the adverse impact of foreign currency, global retail sales grew by 16.4%. The drivers of this growth included domestic same-store sales, which rose by 14.5% in the quarter. The increase this quarter was comprised of franchisee same-store sales, which were up 14.4%, and company-owned stores, which were up by 15.9%. This was due primarily to strong order growth. We also saw some ticket growth during the quarter.
We are pleased to report that we opened 17 net domestic stores in the first quarter, consisting of 22 store openings and 5 closures. For the trailing 12 months, we opened 93 net domestic stores. Our international division had another strong quarter as same-store sales grew 7.8%, lapping a prior year quarter increase of 7.4%. Our international division also grew by 93 stores, which made up of 140 store openings and 47 closures. We had more closures than usual this quarter as we recorded 36 closures in Peru. We are working to reopen the market. Over the past 4 quarters, our international division has grown by 658 stores. Turning to revenues. Total revenues were up $48.2 million, or 10.6% from the prior year. This increase was primarily a result of 3 factors.
First, higher supply chain center rev volumes, as well as increased sales of equipment to stores in connection with our store reimaging program. These supply chain increases were partially offset by lower commodity costs, which were passed on to franchisees. Second, higher domestic same-store sales and store count growth. Last, higher international royalties, again from increased same-store sales and store count growth, which was partially offset by the negative impact of foreign currency exchange rates. Moving on to operating margin. As a percentage of revenues, consolidated operating margin for the quarter increased to 31.3% from 30.2% in the prior year quarter. The main drivers included improved company-owned store operating margins, which benefited from lower food costs and fixed cost leverage. This margin increased as a percentage of revenues from 23.9% to 26.2%. Our supply chain margin percentage increased from 10.7% to 11.2%, primarily from a decrease in commodity prices.
As a reminder, commodities are generally priced on a constant dollar markup to our franchisees. Therefore, lower commodity prices do not impact our supply chain dollar profit. They do, however, positively impact our supply chain margin as a percentage of revenues. The average cheese block price in the first quarter was $1.54 per pound versus $2.16 in the same period last year, which led to our overall market basket decreasing 5.9% as compared to the prior year quarter. We had previously communicated that we expect the commodities we use in our system to be down 2%-4% in 2015 from 2014 levels. At this point in the year, we now expect that the commodities we will use will be down 3%-6% in 2015 from 2014 levels.
Currency exchange rates negatively impacted us in the quarter by $3.6 million versus the prior year quarter due to the dollar strengthening against most currencies. We had previously communicated that foreign currency could exceed an $8 million-$12 million negative impact on pre-tax earnings for 2015. Due to the dollar continuing to strengthen during the first quarter, we now need to update our foreign currency projections for the full year. Based on current projections, we estimate that foreign currency could have a $14 million-$20 million negative impact on pre-tax earnings for 2015. Again, for perspective, we estimate that a 1% strengthening of the dollar against our basket of currencies has roughly a $0.015-$0.02 negative impact on our full-year EPS. Now let's discuss our G&A expenses. G&A increased by $9.9 million in the first quarter versus the prior year quarter.
$1.7 million of this change was from a non-recurring gain we recognized in the first quarter of 2014 on the sale of 14 corporate stores. We have detailed this as an item affecting comparability in our 8-K. The remaining increase in G&A was due to several factors. First, we made planned increases in e-commerce and technology support. I would point out that our investments in technology are partially offset by transaction fees that we receive, which are currently running around a million and a half dollars per month. Our higher same-store sales led to increases in volume-driven expenses such as franchisee incentives, variable performance-based compensation, and company-owned store advertising contributions. For the full year, we now project that our G&A could be in the range of $270 million-$275 million. For our 53-week year, we estimate that the extra week will drive approximately $4 million of this total expense.
Keep in mind too, that our G&A expense for the year can vary up or down by, among other things, our performance versus our plan, as that affects variable performance-based compensation expense. Regarding income taxes, our reported effective tax rate was 37.6% for the quarter. We continue to expect that 37%-38% will be our effective tax rate for the foreseeable future. Our first quarter net income was up $5.8 million or up $7.2 million when excluding the items affecting comparability. This, as adjusted, 18.3% increase was primarily driven by the higher domestic and international same-store sales, global store growth, and supply chain volumes, offset by the negative impact of foreign currency exchange rates. First quarter diluted EPS, as reported on a GAAP basis, was $0.81. This $0.81 is a $0.13 or 19.1% increase from the $0.68 as adjusted EPS in the first quarter of last year.
This is how the $0.13 difference breaks down. Foreign currency exchange rates negatively impacted us by $0.04. Lower diluted share count, primarily due to share repurchases, benefited us by $0.005. Higher effective tax rate negatively impacted us by $0.005, and importantly, our improved operating results benefited us by $0.17. Turning to our use of cash. During the first quarter, we repurchased and retired approximately 291,000 shares for $29.5 million at an average price of $101.46 a share. So far in the second quarter, we have repurchased 178,000 shares. We also returned nearly $14 million to our shareholders in the form of a quarterly dividend. Overall, our strong momentum continues in the first quarter, and we are very pleased with our results. Thank you for your time today, and now I'll turn it over to Patrick.
Thanks, Mike. It was an outstanding start to 2015. Many who follow the Domino's story continue to ask the same questions. What catalyst can we point to in helping explain our momentum and continued positive performance? While I may run the risk of sounding repetitive, the truth is the truth. The fundamental strength of the business and the equity in our brand name have proven again and again to deliver a strong financial outcome over time and in multiple macro environments. Global net store openings were the highest in a decade for the first quarter, and our trailing 12 months net store openings number is now at 751, a net growth of over two stores per day. This momentum, along with our same-store sales, helped us deliver 19% adjusted EPS growth, despite the effect of foreign exchange headwinds from the strong U.S. dollar.
Domestically, we've now had 16 consecutive quarters of positive same-store sales. Our last negative quarter was rolling over 14.3% from the quarter when we launched our new and inspired pizza. Our extraordinary streak of positive consecutive quarters in the international has now reached a whopping 85. All in all, we are very pleased with the start to 2015 and the fact that our story of strong fundamentals and sustained performance continues. Looking specifically at our first quarter domestic business, I'm incredibly proud of our 14.5% same-store sales comp. We are accomplishing this by building brand equity over time through our compelling advertising, innovative technology, strategic menu management, strong operations, and more recently, store reimages. It's proven to be a winning combination. One of the things that excites me the most when it comes to our domestic franchisees is the progress we've made on store-level profitability.
The results are now in on 2014 franchise profitability, and it was a record-setting year, with a domestic average of approximately $89,000 in EBITDA per store. Our work here is not done, and we will continue to keep this top of mind in everything we do. I am very pleased this continues to trend up to even higher levels. Even with franchisees investing in reimaging to the new Pizza Theater look, they're continuing to build new stores and drive domestic store growth momentum. Wrapping up on our domestic business, I think about our current ad campaign, where we rather ceremoniously drop pizza from our name, as one that presents the state of our brand extremely well. We are more than just pizza, and that goes well beyond product and menu offerings and into the overall experience that continues to connect customers with our brand.
One of those connection points is certainly technology, and our leadership position of unmatched innovation continues to evolve the brand and revolutionize the Domino’s customer experience. About 50% of our sales in the U.S. now come via digital ordering channels. Our approach continues to shape this new tech-to-table category, and our innovation won't slow down anytime soon. We recently unveiled three highly innovative new ordering platforms, Pebble and Android Wear smartwatches, as well as the ability to now order on a smart TV through our partnership with Samsung. In addition to being more than just pizza, on the technology front, we're proud to say we are clearly now more than just mobile. Whether it be smartwatches, smart TVs, or voice-enabled platforms such as Ford SYNC and Dom, our virtual ordering assistant, we're fulfilling our goal of enabling customers to order from Domino’s anytime, any place.
These strategic investments in technology have continued to pay off in driving results and increasing shareholder return, and we're committed to these investments and doing what it takes to maintain our position as a technology leader. On the international front, as Mike mentioned, it was yet another strong quarter. This business continues to serve as a prime growth driver. Same-store sales remain very strong, and the performance of our publicly traded master franchisees, including Domino’s Pizza Group, Domino’s Pizza Enterprises, and Alsea, has been nothing short of terrific. We've seen great performance from some other standout markets too, notably Turkey, Canada and Brazil, and we are also pleased with the improving same-store sales in India. These results certainly demonstrate our continued global success as we have now exceeded 21 consecutive years of quarterly same-store sales growth in international.
We were very pleased with 140 growth store openings in the first quarter, as well as market openings in Azerbaijan and Cambodia. I'm very excited about the master franchise leadership in these markets and their enthusiasm about introducing the Domino’s brand to local customers for the first time. We also continue to pursue a common point-of-sale platform in our international stores, with about 60% of stores outside the U.S. now using Domino’s Pulse. It's a great example of sharing best practices with our master franchisee partners, and we look forward to the operations management and digital tools that Domino’s Pulse offers being utilized by stores across the globe, just as they have in the U.S. While there are many international markets leveraging digital in impressive fashion, there are still plenty of markets that have yet to launch online ordering and have tremendous digital opportunity.
Even with this, we continue to average about 40% of digital sales in our channels in international markets. We continue to collaborate and share best practices around the world to help more markets reach their full digital capability. Wrapping up my commentary on the first quarter, our fundamental strengths and continued momentum paved the way for a very strong start to 2015. I'm encouraged by our franchisee profitability and the U.S. improvements in job growth and employment, something that, as I've previously noted, correlates to more pizza orders. I'm encouraged by our undeniable position as a technology leader and digital innovator. I'm encouraged by the repeated success of our international business, and beyond metrics and figures, I am both encouraged and inspired by the Domino’s global team and how we've begun yet another year with passion, energy, and results. Thanks for your time. I'll now open it up for questions.
As a reminder, if you would like to ask a question, simply press star then the number one on your telephone keypad. Your first question will come from the line of Karen Holthouse with Goldman Sachs.
Hi. Congratulations on a great quarter. Looking out as you go from here in the year, what are your thoughts as you're looking at your company stores and then franchisees on the wage environment and with minimum wage increases in some states, other signs that wages are coming up, plans to help manage through that or help your franchisees manage through that, what are the opportunities to offset it?
Yeah. You know what? It's very manageable. When you're generating this level of top-line growth, we're very comfortable with the environment. Certainly, it's something that we can manage through. Minimum wage is a starting wage, frankly, the vast majority of the team members in our corporate stores and in our franchise stores are delivery drivers. Delivery drivers with tips are making substantially more than the minimum wage. We're very comfortable that we're going to be able to manage in this environment.
Just a quick modeling follow-up. The change in G&A guidance, how much of that relates to technology spending versus just higher bonus accruals versus something else?
It's a little bit of both, and it's not a significant change from what was out there before. It is a little bit higher, but it's certainly, as you can see, the variable component, which also includes things like advertising contributions in corporate stores, it is significant.
Okay, great. Thank you.
Your next question will come from the line of Chris O'Cull with KeyBanc.
Thanks. Good morning, guys.
Morning, Chris.
Patrick, has your recent advertising campaign resulted in an increased mix for non-pizza items, or is there anything you can tell us about maybe how you expect guests to use you differently with this campaign, maybe different occasions?
Yeah, it absolutely does. We've done this Mix & Match promotion that we've had out there probably once a year on average, something like that, to remind people of the other product offerings that we have. When we do that, it certainly drives mix of other products, and we saw that again in the first quarter. What I'd say is we are and will continue to be overwhelmingly a pizza company. It is the majority of what we sell, and it's going to continue to be the majority of what we sell. We've got great sandwiches and pasta and chicken and other items on the menu, and we make sure we remind people of that on an occasional basis, and it works.
I had a question regarding franchise contribution rate to help recover some of the investment in the digital platform. Has that changed at all, or is there any plans for that to change?
The numbers reflected in the first quarter don't reflect a change. There certainly can be changes going forward.
Okay. Thanks, guys.
Your next question will come from the line of John Glass with Morgan Stanley.
I'm wondering, given the strength in comps, if throughput is now the issue. In other words, you've got such huge demand, and that's been very clear. Is there a bottleneck in the stores? Do you have to do things to relieve that bottleneck? Are there capacity constraints given this level of sales gains?
In the first quarter of the year with a lot of weather knocking around, although I would say the weather was, even though regionally it was pretty tough, it was not an abnormal first quarter for weather. Certainly you're going to feel some of that. We did a little bit. Our highest volume stores are getting a little capacity constrained, so you're seeing some stores that need to add some new equipment, to add some new ovens. I'll tell you, that's the highest quality problem you will ever face, and certainly something we know how to deal with. Yeah, there are certainly some small percentage of our stores that are seeing volumes now that frankly, they weren't built for when they were built 10 or 15 years ago.
That makes sense. You talked a lot about over the last several years of technology and leader in ordering, I'm wondering if there's a way to use technology for the delivery side of it as well, right? Some restaurants have begun to experiment with Uber or other kind of new technologies on the delivery side. Is that an opportunity for you in some respects, or is the delivery driver and that kind of piece of the business sort of sacrosanct and that's not what you look for to gain further efficiencies?
Well, we've got the best kind of real-time delivery system around. I guess what I'd say is, when you think about an Uber or some of the other folks that are coming in, the technology that they're using is terrific, at the end of the day, they are service companies. It's about can you find great people who are motivated? Can you back them up with great systems that are going to help them be efficient? We've been doing that and doing that very well for a long time. So are there things that we can do that potentially are going to make us more efficient? Sure. It's part of the investment that we make in technology to help our folks be more efficient over time. Are we going to wind up kind of using somebody else to do it, something like that? No.
We're plenty busy and plenty efficient with our people. They want to see a Domino's delivery driver showing up looking great in uniform. That's certainly the way that it's going to continue.
Got you. Thank you.
Your next question will come from the line of Alton Stump with Longbow Research.
Yes, thank you, and good morning.
Morning, Alton.
Of course, great job on the quarter. Obviously a huge comp in particular. Can you maybe talk about the Specialty Chicken launch, which, if I recall, was April of last year, if you're still seeing a benefit to comps year-over-year in the first quarter? As you look out in coming quarters, if you can talk about any sort of new product plans, obviously, I would guess you probably don't want to get specific, but just any color on sort of what you plan to do on the new product front in coming quarters.
Yeah. Specialty Chicken did very well for us. Our chicken mix continues to be higher than it was Before we launch Specialty Chicken. At some level, is it part of what's contributing to our comp? Yeah, probably is. Though I'd say at this point that's more at the margin than a big part of it. In terms of new products, we absolutely have lots of things in the pipeline that we can turn to. I think the overall message as we've talked about before, and certainly as we talked about at our investor day in January, we think our discipline around our menu and launching fewer things in a bigger way, and doing that very thoughtfully and purposefully so that we're able to execute well in our stores, is continuing to be a fundamental strength for us.
With what we think was, at least from those who have released so far, the best comp in the restaurant industry in the first quarter. We think our approach on this is working awfully well.
Simple. Thank you. Real quick, if I could follow up, if I missed this, I apologize, I think you guys had talked about 2%-4% comp growth in the U.S. heading into the year. Is there any updates on that range after obviously the huge first quarter?
No, that's our long-term guidance for you. 14.5% is a little higher than 2%-4%. Yeah, we were off the high end of that for the quarter. Obviously, we're incredibly pleased with the comp in the first quarter. I guess what I'd say is 2%-4% is the long-term guidance that we've given. Yeah, we're awfully pleased to have beaten it by, what I guess, 10%+. We're pretty happy with that.
Got it. Makes sense. Thank you.
Your next question will come from the line of Jeffrey Bernstein with Barclays.
Great. Thank you. Two questions. First one, Patrick, thank you for that help on the 14 bigger than 2-4. That was a very strong result. Congratulations.
You want to be transparent, Jeff. Thanks.
Yes, no, I appreciate all the help I can get. First question is just on the comp. We've heard from a lot of people in the industry that the quarter started off heroic and then slowed. I know you don't give monthly sales, but I'm wondering whether you can opine upon whether you saw something similar. You used to talk about the industry maybe growing at 1%. I'm wondering whether this is a Domino's phenomenon or is all of a sudden there just a resurgence across broader pizza segment. I had one follow-up.
Yeah. I think the pizza category is doing a little better than the restaurant category overall. I think it's up maybe more 2%-3%, there's no question that we're taking share right now with the numbers that we're putting up. In terms of within the quarter, I'm not going to comment on that. What I would say is, what we are seeing is that the employment market looks awfully healthy out there. We've said it many times, and it continues to be true. Employed people buy more pizza than unemployed people. When we look at the overall market, the overall restaurant category, we're continuing to see the employment picture looking good. Month to month, we're continuing to add jobs. Certainly, we'd like to see that a little stronger than we saw it the last month or two.
The trend is clearly up. The recovery is continuing, and we've said often that correlates to higher, that playing out again.
Got it. Just from a balance sheet perspective, Mike, there was no mention of leverage positioning and obviously Domino's being a heavily franchised business, that's always a key part to the story. I'm just wondering whether Any comment in terms of closely monitoring the markets or if you're content with leverage falling to that 4 times or below range, or how we should think about that over the next 12 months?
Well, as we've said, we're comfortable in the 3 to 6 range. We're still solidly into that range. We'll continue to monitor and we'll continue to evaluate what we think is the best approach for us.
Great. Thank you.
Your next question will come from the line of Brian Bittner with Oppenheimer & Co.
Thanks. Good morning, guys.
Morning.
Follow up on John's earlier question. You talked about some stores that are becoming a little bit capacity constrained. What type of volumes are those stores doing so we can just at least imagine what the upside in the current asset base looks like in the U.S. potentially?
Well, we've always said, we think there are at least 1,000 stores yet to be built in the U.S. As unit economics are continuing to improve, we like the building momentum on that. At least the kind of final estimate on franchise profitability last year at 89,000, with moderating food costs, as you saw in our corporate store numbers. With the comp that we put up, clearly first quarter this year was better than first quarter last year as well. The cash flow per store continues to go up. We're feeling pretty good about how that plays through over time. From a capacity standpoint, it certainly means that as sales go higher, there's even more opportunity to continue to build on that front.
Yeah, I appreciate that. I should have framed the question differently. I think what I'm asking is the actual stores that are seeing some capacity constraints on volumes, what type of AUVs levels are they doing so we can think about what type of AUVs those stores are doing versus the overall portfolio?
Got it. I don't know that I'm going to get into giving a kind of a specific number on that. It depends on the store. We've got stores that are 1,200 sq ft, and they're pretty capacity constrained. If they're doing $30,000, $40,000 a week, it's tough to do that out of a small store. We've got stores, I can think of stores on military bases that essentially have two lines. They are effectively double the capacity in a single store, and they can do substantially more than an average store. There's not a single answer that I can give on that, but what I can tell you is with the increases in volume we're seeing, there are certainly more stores that are falling into the category of being a little capacity constrained.
There are really two ways to solve that, either putting more equipment into existing stores or building more stores. Both of those are relatively straightforward to do, and are pretty good for our shareholders.
Okay. Thanks on that. Last question, you guys obviously have a lot more insight into the business and the trends than we do. The acceleration in the business to the mid-teen comps is obviously incredible. I think what I'm really trying to understand better is when you look at your business and you see that inflection, how much of it is you truly being at the epicenter of a tightening labor market? How much of it is doing what you're doing with the technology things and new products and just kind of thinking about macro versus micro here?
Look, if you look at what I said earlier on category growth, that we think category growth is more in the 2%-3% range, and that includes store growth in that number. That's not just same-store sales. We're clearly outperforming the category by a lot right now. It is more about things that we're doing in the business. I guess I've got to fall back on what I said before. It's about just a lot of different things coming together, getting the food right, having the best franchisees in the business. I mean that. We've got terrific franchisees who are leaning into the business right now. They're excited about what's happening. They're staffing up as volumes are growing so they can continue to give great service. It's about the advertising that's been very effective.
It's about, we think some of the best, if not the best use of technology, in the category, giving customers a better experience. It's about getting stores re-imaged. I'd remind you, that's still only kind of 20%-25% complete in the U.S. It's just a lot of different things that have been coming together that we've been talking about, but are really all happening right now. That's strengthening the brand in the minds of consumers, which is building pretty phenomenal momentum in the business.
Makes sense. Thanks, Patrick.
Your next question will come from the line of Peter Saleh with Telsey Advisory Group.
Great. Thanks and congrats on the quarter. I wanted to ask about the you mentioned the remodels, can you give us an update on the returns that you're seeing on the remodels and then also on the relocations? How many relocations do you guys expect to do at this point? Is there any impact when you relocate from maybe a less desirable location to a better location on the carryout business?
Let's see. I'll take the last one first. Yes. On the relocations that are getting done, you see a bigger bump on sales and more of that is within carryout. What you're going to see is it's still going to be a minority of the stores that are going to relocate over the course of the next couple of years. This is primarily going to be about re-images. My answer on re-images, and the results that we're seeing continue reflect exactly what we've said in the past, that an individual store getting re-imaged, you'll see a very low single digit, a one point, two points, maybe three points, in lift versus the stores around it when the re-image is done. What we always have believed, and I think what you're seeing play out, is that it's really more about the overall brand momentum.
As you're getting lots of these done and people start rethinking Domino's Pizza, it's really more about overall brand momentum than it is about the specific store that's getting done. We're still roughly a two-thirds delivery, one-third carryout business. It makes sense. Only a third of our customers are walking into the store. Maybe if you take it a little bit lower, so maybe 35% or 40% of orders, you're going to have less of an immediate impact on top sales from a re-image in a specific store. Given what we're doing with the overall business and the brand and technology and the food quality, and service, everything that we're doing, we can't have stores that don't reflect our overall brand image. We think it adds to the momentum of the brand. That's what we're seeing.
The individual store re-images don't produce that big of a bump in the near term, we do think it's part of what's feeding into the overall brand momentum.
Got it. Great. Then on pricing or menu pricing, I know lots of the other restaurant companies have been talking about higher pricing than historical, at least for this year. How are you and the franchisees thinking about pricing in the environment where you've got commodities actually coming down, but you're probably seeing some labor pressure as well?
I think the answer is really in the profits that you're seeing in the stores. They had record profitability last year. They did that in an environment where commodities were up pretty dramatically. Now the commodities are easing. You're seeing that play through in even better profitability. Our system, our franchisees were exceptionally disciplined last year when commodities were up a lot. They decided that the long-term benefit of the customers feeling good about the value they're getting was more important than simply covering a little bit of short-term pressure from a cost standpoint. This year, that's going back the other way. Any pressure that you see on wages, which again, for us, is reasonably minimal because most of our people are tipped and are making far more than the starting wage. You're seeing a lot of discipline in our system.
They're benefiting now as commodities have gone a little bit lower, and it's playing back ultimately to discipline around doing what the consumer needs, what our customers need to continue to give us more of their business.
Great. Thank you very much.
Your next question will come from the line of Joseph Buckley with Bank of America.
Yeah, thank you. Good morning. Hey, Patrick, you've mentioned the tip aspect of the drivers a few times. Remind us, do the drivers, are they paid a tip credit wage or are they paid at least a minimum wage and then tips on top of that?
It depends on the franchisee. Remember, over 90% of our stores in the U.S. are owned by franchisees. They control that. What I can tell you is it is all over the board, and it's really market-dependent. There are places where people could pay tip credit and they're not. There are places where they are paying above the starting wage. There are places where people are paying out of the tip credit, you pay what you need to pay to have good people in the stores and be staffed. What remains true is that with tips, our drivers are certainly making, on average, $10 plus, and probably substantially more than that as you look across the country. They're doing well, it's really more about market demand for labor than it is about the starting wage.
In the company stores, is it a tip credit wage or?
That varies also by market.
Okay.
There are some markets where we're doing that. There are some markets where we aren't. There are also some markets where we can't, where tip credit wage is not available, and you pay the same minimum as non-tipped employees.
Okay. Just another question on consumer activity, and obviously your comp is not reflecting the macro, but the macro may be a small part of it. Are you seeing customers willing to spend more? Is the mix going up or add-on items going up? Are you seeing the consumers willing to spend a little bit more aggressively?
Not particularly. You've been asked the question before on gas prices going down, and we just don't think that's a particularly big factor in consumer spending right now. You've certainly seen the same data that we have that savings rate may have even gone up a little bit in the last three or six months. I don't think that's really playing in, and we're not seeing that. Mike mentioned in his prepared remarks that this was overwhelmingly about order growth for us, but our ticket was up a little bit. Though I would remind you that ticket is both a function of price and what they're buying, kind of the basket of products that are in the order. No, I wouldn't say that we're seeing a particular change in customers' willingness and ability to pay more. People are remaining disciplined.
Coming out of the crisis now five, six, seven years ago, customers are smarter, they're remaining disciplined. They continue to want value, which is a function of both the quality of the food and the quality of the service as well as the price. I'm not seeing a dramatic change there.
Okay, thank you.
Thanks, Joe.
Your next question will come from the line of John Ivankoe with JP Morgan.
Hi. Thank you. Congratulations, obviously, very exceptional. I did want to talk about the restaurant modernization and, I guess, kind of more specifically, the Pizza Theater in terms of what some initial experience has been in terms of sales lift, how far along you are with that in terms of the overall program, if the costs are where you want. I think a thing that's been discussed a lot on this call is whether that can actually start to push business to things like lunch and earlier in the week and what have you, where I think most Domino's stores would in fact have capacity if they don't have capacity on a Friday or Saturday night, for example.
Right. John, I think the broad answer is that we've always been very good at delivery. We haven't been particularly differentiated on carry-out and the experience that the customer has in our store. So getting that right starts with having a good environment for the customers and I would add, importantly, for the team members. Our team members prefer to work in these new stores. So it helps us get better people, it helps us be staffed in the stores. It's relatively early in this process. We still are only 20% or 25% kind of re-imaged in the U.S. We're moving very quickly on that. Those numbers are going to continue to go up very quickly over the course of this year and next year, really until the end of 2017.
It's probably too early to say that there are dramatic shifts in day parts and mix and that sort of thing, what I would say is having a great environment for customers in our stores certainly gives us far more opportunity looking forward to do something that's differentiated for our carry-out customers as well. It's certainly something that we're looking at. We're excited about the prospects of getting better there. This is foundational. They've got to look good first.
If I may, obviously there's a lot of attention, probably even more so in the investment community than maybe even the consumer, but certainly a lot of attention in both places around this personally made, what I'm going to call it, Neapolitan-style pizza. Do you want to have the Pizza Theater in place before you start looking into a segment like that, or does a segment like that make sense for Domino's? Or could you even basically serve that customer or serve that demand within your existing format?
If you look at some of what people are calling the fast casual players, it's about food quality, it's about the environment, it's about open kitchen. It's still about giving speed of service. We think we're doing all of those things and doing it better than most. As you get into kind of the specifics of your question, which is really around the product itself, and maybe a wood-fired oven, a thinner crust, that sort of thing, I don't think you're going to see us doing that. Certainly, having all of the rest of the things in place, we're going to watch. You're not going to see us bringing lumber into the stores soon to start cooking the pizzas. That just isn't going to work for our model.
I think we know you wouldn't, Patrick.
It does give us an opportunity to look at things. I don't think you're going to see us go all the way over there, it does give us an opportunity as we're showcasing the food to look at how we drive that even more strongly.
Thank you.
Thanks, John.
There are no further questions in queue at this time. Presenters, are there any closing remarks?
No, I just want to thank everybody for getting on the call. I know it is a very busy earnings season right now, and I look forward to talking to you again as we discuss our second quarter earnings on July 16th.
This does conclude today's conference call. You may now disconnect.