Domino’s Earnings: Even as Value-Hungry Consumers Weigh on US Traffic, Strategy Sound; Shares Rich

With consumers increasingly focused on value amid economic uncertainty and swelling restaurant competition, our expectations for wide-moat Domino’s fiscal 2025 first-quarter results were cautious. However, based on investments and promotion to appeal to a cash-constrained consumer, Domino’s withstood pressures and chalked up a mere 0.5% drop in US comparable sales (on negative traffic and mix, versus our expectations for a 1.5% fall) and international comparable sales rose 3.7%, beating our 2% growth projection. While the size of its restaurant network slipped due to outsize closures in international markets, we continue to believe Domino’s can approach its goal of 175 net new domestic stores in 2025 while maintaining international growth in line with fiscal 2024’s 4.5% levels. Beyond the top line, we were impressed by Domino’s profit marks, as its $4.33 in earnings per share outpaced our $3.63 estimate for the quarter, thanks to stronger-than-expected sales and international royalties.