Evercore Analyst David Palmer on Domino's, QSR Trends, and McDonald's

Domino's Long-Term Story and Sales Drivers

• 💡 Investors are not fully convinced of Domino's long-term story, despite the company actively driving sales over the next 12 months.
• 🎯 There is skepticism about Domino's ability to maintain 3% plus same-store sales after the current contributions from Stuffed Crust and DoorDash.
• 🚀 Domino's is leveraging third-party apps like DoorDash, with expectations of adding a couple of points to sales over the next year.
• 🔑 The key challenge is whether Domino's can funnel customers recruited through third-party apps to their first-party loyalty program for direct relationships.
• 📈 Domino's is also exploring chicken innovation and upgrading its e-commerce platform for both delivery and carry-out.

QSR Industry Trends and Consumer Behavior

• 📊 Restaurants are currently seeing flat to flattish same-store sales across major fast-food and pizza chains in the first half of the year.
• ⚠️ Concerns exist about a potential carb issue or core product problem within the pizza category, similar to the salty snack market.
• 🥩 Beef prices are experiencing double-digit inflation, impacting hamburger chains and some franchise operators, though high-end steak places are less affected.
• 💰 The industry experienced overpricing during the COVID era and subsequent wage growth, leading to questions about consumer spending on dining out versus staying in.

McDonald's Strategy and Outlook

• 🍔 McDonald's is becoming more constructive, with the Snack Wrap significantly boosting sales, contributing to a mid-teens mix and driving a 7% plus lift.
• 💲 The brand needs to re-establish a national value proposition, similar to Taco Bell, especially after moving away from value during COVID.
• ✅ The success of the Snack Wrap at a $2.99 price point increases the likelihood of McDonald's implementing a national value strategy.
• 🚀 Despite past execution issues, McDonald's appears to be improving its strategy for the second half of the year.