Domino's Pizza Inc (DPZ) Q1 2019 Earnings Call Transcript

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Domino's Pizza Inc (NYSE: DPZ)Q1 2019 Earnings CallApril 24, 2019, 10:00 a.m. ET

Contents:

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  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome the Domino's Pizza First Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Tim McIntyre, EVP Communications Investor Relations and Legislative Affairs. Sir, you may begin.

Timothy McIntyre -- Executive Vice President Communications, Investor Relations and Legislative Affairs

Thank you, Bridget, and hello, everyone. Thank you for joining us for the conversation today regarding the results of our first quarter 2019. The call will feature commentary from Chief Executive Officer, Ritch Allison; and Chief Financial Officer, Jeff Lawrence.

As this call is primarily for our investor audience, I ask all members of the media and others to be in listen-only mode. A friendly reminder to our analysts: please stick to one question on this call because we want to give all 20 or so of you the chance to participate. In the event that any forward-looking statements are made, I refer you to the safe harbor statement you can find in this morning's release, the 8-K and the 10-Q. In addition, please refer to the 8-K to find disclosures and reconciliations of non-GAAP financial measures that may be used on today's call.

And with that, I'd like to turn the call over to Jeff Lawrence.

Jeffrey Lawrence -- Chief Financial Officer, Executive Vice President

Thank you, Tim, and good morning, everyone. In the first quarter, our positive global brand momentum continued as we delivered solid results for our shareholders. We continue to lead the broader restaurant industry with 32 straight quarters of positive U.S. comparable sales and 101 consecutive quarters of positive international comps. We also continued to increase our store count at a healthy pace as we opened 200 net new stores in Q1. Our diluted EPS was $2.20, an increase of 10% over the prior year quarter, primarily resulting from strong operational results. With that, let's take a closer look at the financial results for Q1. Global retail sales grew 4.6% in the quarter, pressured by a stronger dollar. When excluding the negative impact of foreign currency, global retail sales grew by 8.5%. This global retail sales growth was driven by increases in same-store sales and the average number of stores opened during the quarter.

Same-store sales for the U.S. grew 3.9%, lagging a prior year increase of 8.3%. And same-store sales for our international division grew 1.8%, rolling a prior year increase of 5%. Breaking down the U.S. comp, our franchise business was up 4.1%, while our company-owned stores were up 2.1%. We saw both ticket and order growth during the quarter. However, we experienced pressure on the U.S. comp from our successful fortressing strategy as well as from aggressive marketing of third-party aggregators. Our international comp for the quarter was driven primarily by ticket growth and to a lesser extent order growth. As I mentioned on the call last quarter, our Q4 2018 comps were negatively impacted when compared to the prior year as our fiscal calendar did not include New Year's Eve. That shifted back favorably in Q1 as comps globally were positively impacted by more than 0.5 point this quarter.

On the unit count front, we opened 27 net U.S. stores in the first quarter, consisting of 31 store openings and 4 closures. Our International division added 173 net new stores during Q1, comprised of 183 store openings and 10 closures. We have opened 1,148 global net units over the last 12 months, demonstrating the broad strength and attractive 4-wall economics our brand enjoys globally. Subsequent to Q1 and as disclosed in our 10-Q filed this morning, we have announced the sale of 59 corporate stores in New York to a group of existing strong franchisees. This transaction will help us accelerate the fortressing of the New York market and further allows us to continue fortressing our remaining corporate store markets where we remain committed and focused. Turning now to revenues.

Total revenues for the first quarter were up $50.6 million or 6.4% from the prior year resulting primarily from the following: first, higher food volumes driven by strong U.S. retail sales resulted in higher supply chain revenues; second, higher U.S. retail sales resulting from higher same-store sales and store count growth, resulted in increased royalties and fees and higher advertising revenues from our franchised stores as well as higher revenues at our company-owned stores; and finally, higher international retail sales resulted in increased international royalty revenues, but were partially offset by the negative impact of changes in foreign currency exchange rates. FX negatively impacted international royalty revenues by $3.7 million versus the prior year quarter due to the dollar strengthening against certain currencies. Moving on to operating margin.

As a percentage of revenues, consolidated operating margins for the quarter increased to 38.6% from 38.2% in the prior year quarter. Supply chain operating margin was up year-over-year and was positively impacted by procurement savings, but was negatively pressured by labor costs. Company-owned store margin was down year-over-year and was negatively impacted by higher labor rates as compared to the prior year quarter. G&A cost increased $5.5 million as compared to the prior year quarter, driven by continued investments in technological initiatives as well as other areas. Interest expense decreased $4.8 million in the first quarter, driven primarily by a higher average debt balance from our recapitalization transaction in 2018. Our reported effective tax rate was 15.1% for the quarter, up 0.8 percentage points from prior year. The reported effective tax rate included a 7.9 percentage point impact from tax benefit on equity-based compensation.

We expect that we will continue to see volatility in our effective tax rate related to equity-based compensation. When you add it all up, our first quarter net income was up $3.8 million or 4.3% over the prior year quarter. Our first quarter diluted EPS was $2.20 versus $2 in the prior year. Here is how that $0.20 increase breaks down. Lower diluted share counts primarily as a result of share repurchases benefited us by $0.10. Higher net interest expense resulting primarily from a higher average debt balance negatively impacted us by $0.08. Foreign currency negatively impacted royalty revenues by $0.06. And most importantly, our improved operating results benefited us by $0.24. Now turning to our use of cash.

During the first quarter, we repurchased and retired approximately 34,000 shares for approximately $8.1 million at an average purchase price of $243 per share. Subsequent to the first quarter, we returned $26.6 million to our shareholders in the form of $0.65 per share quarterly dividend. One housekeeping note. As we discussed in January at our Investor Day, we adopted the new GAAP leasing standard. You will see a significant gross up on the balance sheet in Q1, but no impact on the income statement. Overall, our solid consistent momentum continued, and we are pleased with our results this quarter. We will remain focused on relentlessly driving the brand forward and providing great value to customers, franchisees and shareholders.

Thank you for joining the call today, and now I'll turn it over to Ritch.

Richard E. Allison -- President, Chief Executive Officer, Director

Thanks, Jeff, and good morning, everyone. I'll take a few minutes and speak briefly about what mattered during a solid first quarter for Domino's. Overall, I'm pleased with our comparisons over a relatively strong quarter a year ago, particularly related to what matters most, the balanced blend of comp and unit growth that drove our overall retail sales performance. During the quarter, we continued to fortress our markets in the U.S. and around the world and celebrated an important milestone in the growth of the Domino's brand with the opening of our 16,000th global store on March 4 in Cheektowaga, New York. Looking first at our U.S. business, it was a good quarter for both same-store sales and unit growth. It was our 32nd consecutive quarter of positive comp performance and featured our Points for Pies loyalty-driven campaign.

In addition to driving sales in Q1, the campaign grew additional awareness, participation and active membership of our loyalty program, an area we will remain focused on going forward. Our solid franchisee economics were once again demonstrated by another low closure count with only 4 U.S. store closures during the quarter. It contributed toward our strong overall net store growth. I want to thank our U.S. franchisees for continuing to do a great job serving our customers and providing a very solid start to 2019, even in the face of a tough operating environment. I traveled around the U.S. quite a bit in Q1 visiting with our franchisees across the country, and I remain convinced that we have the best franchisee base and the best operators in the restaurant industry.

Moving to international. It was a great start to the year for unit growth with a significant acceleration over Q1 2018. We also achieved our 101st consecutive quarter of positive same-store sales, but make no mistake, I am not happy with our recent international comp performance and the performance of a few markets, in particular. We expect more from the top line of this historically high-performing business segment and delivering growth at the levels we and our master franchisee partners expect. During the quarter, we continue to see softness in a few large European and Pacific region markets where we have work to do to better align our value proposition with local consumers. While we certainly have near-term challenges, I want to be clear that my confidence in the model and in the business segment as a whole has not wavered. We are committed to working with our master franchisees and to doing our part as partners to reverse the recent softer comp performance.

I want to highlight one area where we plan to step up our efforts to advise and assist our master franchisee partners. This centers around the use of and reliance on customer insights, research and data in making big strategic decisions for the business. This has been a huge driver of our success for the past decade in the U.S. Data-driven decision-making has improved our performance in many areas, including advertising, pricing, new product strategy, e-commerce and loyalty. Lately, it has enhanced our performance in store siting and development to support our fortressing initiative. This is an area where our U.S. business is significantly advanced relative to our international markets. Reliance on data and insights has kept us educated, consistent and aligned with our franchisees in ways that would absolutely benefit many of our master franchisee partners.

My team and I are focused on continuing to emphasize this and on doing what we can to help our master franchisee partners establish and grow their capabilities in this important area. With all of this said, I still believe we have the best international model in QSR. We have terrific master franchisees and the fundamentals within our International segment remain strong. I am very confident in our business model and in the team that we have in place to lead it. We enjoy solid retail sales growth, leading market share positions and strong unit-level economics in many key markets around the world. We will work with our partners to address the current challenges over both the short term and the long term.

Lastly, I want to touch on an additional area that matters perhaps more than any other: our franchisee unit economics. I'm happy to report our final 2018 U.S. store-level EBITDA. Our U.S. franchisees on average finished at $141,000 per store, leading to cash-on-cash returns that continue to not only outpace the industry but signal the health of our system, the strength of our store-level model and, of course, our potential for growth. At the enterprise level, our average U.S. franchisee generated nearly $1 million of EBITDA in 2018, a figure that has nearly tripled since we initially began our fortressing program back in 2012. We remain as committed as ever to the store level and enterprise profitability of our franchisees, both in the U.S. and across the globe. All in all, it was a good start to 2019. We remain focused as always to continue winning on value, winning on innovation, winning on service and winning with the best franchisees in QSR. That's how we'll dominate this category for the long haul as the #1 pizza company in the world.

And with that, we're happy to take some questions.

Questions and Answers:

Operator

(Operator Instructions) Our first question comes from the line of Brian Bittner with Oppenheimer. Your line is open.

Brian John Bittner -- Oppenheimer -- Analyst

Thank you. Good morning, Jeff, you specifically mentioned that you thought aggressive promotional activity by third-party delivery weighed on the U.S. comp this quarter. You've already quantified it -- quantified the fortressing impact for us, so do you want to possibly take a stab at quantifying how you guys think about this third-party impact? And Ritch, what strategically are you doing to fight through this?

Richard E. Allison -- President, Chief Executive Officer, Director

Okay. Brian, so I'll take that one. We're not going to take a stab at quantifying that impact. We've done that for you with our fortressing initiatives and frankly, that's our own data that we can go in and give you a pretty tight estimate on. But most certainly, in the short term, what we saw from the aggregators was a big increase in advertising spend, and push around free and discounted deliveries. And if you had the NCAA tournament on over the course of March, I'm sure you probably saw some of that as well.

So we're not surprised to see that it was driving some trial in some of the major urban and suburban markets, which I think led to slightly greater impact on our same-store sales growth than perhaps it did in previous years. As we think about our a longer view and what we ultimately do about it, it's really unchanged. Frankly, it's not reiterated.

When we take a look across the restaurant industry, it isn't growing any faster than it was before these aggregators entered. So at a macro level, we just don't see a lot of incrementality. What we do see is share shifting across channels and players. And frankly, a lot of profit being pulled out from some of the restaurant companies that are working with the aggregators. So it's hard to imagine that the current approach is sustainable over the long-term, but we don't know. We'll have to see how that plays out.

What's clear for us is that our strategy has to remain the same, and that's to continue to fortress the markets that we operate in. And what that helps us win on is service, helps us win with our drivers by getting more runs per hour and it helps us to continue to build that very important and profitable carryout business that we've been talking to you about for a long time.

Brian John Bittner -- Oppenheimer -- Analyst

Thank you, Rich.

Operator

Our next question is from the line of Matt DiFrisco with Guggenheim Securities. Your line is open.

Matthew James DiFrisco -- Guggenheim Securities -- Analyst

Thank you. I just wondered did -- I might have missed it, but did you guys say how much maybe of the domestic comp was -- did it benefit or not or was there a lift from how you're accounting for the points new program and the free pies? Is that included in the comp? Was that any sort of a benefit? And then I didn't hear if you mentioned something about the GOLO. Is there an opportunity here internationally to lean into one of the major franchisees maybe to bring out your digital system on board rather than their internal systems they've been using?

Richard E. Allison -- President, Chief Executive Officer, Director

So Matt, on the Points for Pies, certainly the Points for Pies program helped us drive sales in the first quarter, but most importantly, it helped us to continue to reinforce and build membership in our loyalty program. As we spoke with you about back in January, we've got 20 million plus active members in our loyalty program, our Piece of the Pie Rewards program, and we saw increases in the first quarter in app downloads and loyalty membership and then also very importantly, as we see customers who become members for the first time, and we start to see them order once and then again, those are positive signs around the business.

Matthew James DiFrisco -- Guggenheim Securities -- Analyst

And then anything with respect to GOLO and potentially some of these larger international franchisees maybe adopting it?

Richard E. Allison -- President, Chief Executive Officer, Director

No new news to share with you there, Matt.

Matthew James DiFrisco -- Guggenheim Securities -- Analyst

Okay, thank you.

Operator

Our next question comes from the line of Gregory Francfort with Bank of America. Your line is open.

Gregory Ryan Francfort -- BofA Merrill Lynch -- Analyst

Hey, guys. Maybe just on the international softness and can you parse out a little bit more what's happening there? Maybe any insights by market and one of the things you're pointing to is using customer insights and data better. What does that mean exactly? How do you do that and sort of when does that start to impact the business? Is that a 6-month, 9-month, 12-month, 2-year sort of an impact that you can start to turn that back toward accelerating?

Richard E. Allison -- President, Chief Executive Officer, Director

Look, Greg, I won't comment on specific markets. What I will tell you, though, is that softness has been more pronounced in a couple of regions, including Europe and our Pacific region over the course of the first quarter. Overall, in our international business, we still grew retail sales 9.1% across the segment, so I'm still really happy with that. Now when we take a look at how we think about using data and insights, we've talked with you all about this for years now. It's been a big driver of our success in the U.S. There are very few decisions that we make about product, about pricing, about marketing, about digital, about loyalty, very few decisions that don't involve a deep reliance on consumer data and insights.

We've established inside the business now with our new global operating structure a center of excellence focused in this area, and we've got team members that are now positioned and accountable to work with our master franchise partners to help bring some of these same best practices and learnings to their business. And our belief is that, over the medium and the long term, we'll be able to help our master franchisee partners just simply make better decisions about their business, just as we've been able to do here over the last decade in the U.S.

Operator

Our next question is from Chris O'Cull with Stifel. Your line is open.

Alec -- Stifel -- Analyst

This is actually Alec (ph) on for Chris. In the past, the domestic system was able to drive restaurant profit with strong transaction growth and tolerate the margin decline. Now that transaction growth isn't as strong how are you helping franchisees stabilize the margin in this inflationary labor environment?

Jeffrey Lawrence -- Chief Financial Officer, Executive Vice President

Yes, Alec, it's Jeff. Great question. When we look at our corporate stores as a pretty good proxy for what's going on with the overall U.S. system, you'll see that we did have again a quarter where labor rates put some pressure on the percentage profits of our units, and even though we're still driving very good dollar profit there, good ROI in that business, it's certainly been a headwind for us and our franchisees are feeling that as well. Getting back to Ritch's more important point, though, continuing to go faster on the fortressing strategy, shrinking down these service areas, putting in more technological tools for our operators, both corporate and allowing our franchisees to use tools as well to manage their own independent businesses, I think gives us a chance to continue to kind of fight through the labor rate challenges and to continue to drive good dollar profit. As Ritch mentioned, we ended up at the high end of the range for unit profitability in dollars, on average, in the U.S. in 2018. And so you never like it when percentages are going the wrong way, but really encouraged that we're driving enough volume to make sure that the dollar profit continues to increase. And again, I don't think it really changes any of the strategies that we've communicated to you before.

Alec -- Stifel -- Analyst

Okay, great, thanks.

Operator

Our next question comes from the line of David Tarantino with Baird. Your line is open.

David Tarantino -- Baird -- Analyst

Hi, good morning. Just a follow-up on that last question. Jeff, I guess with a potentially lower comp rate than you've had in past years and with some of these continued margin headwinds, do you think it's reasonable to expect the profitability per unit for franchisees to be flat or maybe even perhaps it might decline this year? And then I guess a second related question maybe more importantly, is how much margin for error do you think you have in that number before franchisees become concerned about the fortressing strategy and their willingness to develop new units?

Jeffrey Lawrence -- Chief Financial Officer, Executive Vice President

Yes. So again I first point you to the fact that we feel confident with our 3% to 6% comp guidance in the U.S. over the next 3 to 5 years and ultimately, in that 8% to 12% retail sales growth. We do think it will be a mix of both comps and unit growth that gets us there, but while we don't give specific unit economic guidance, what I can tell you is, we put franchise economics at the center plate of everything we do. We know that we are a football field ahead of both new and old competitors in our space, and that gives them the confidence, as you saw again in Q1, for franchisees around the world to open up 200 net new stores. So we think franchisees are excited about the opportunity, they continue to put capital behind our brand in the U.S. and abroad, and I think you saw that with the New York transaction that we announced this morning. You have franchise there in a high-labor rate market wanting to put their capital behind the brand, wanting to grow in New York City. If we can do it there, we can do it anywhere.

Operator

Your next question comes from the line of Sara Senatore with Bernstein. Your line is open.

Sara Senatore -- Bernstein -- Analyst

Thanks. Actually have 2 follow-ups so hopefully that counts as just one question. The first follow-up I had was on the aggregator comment. You said you didn't think it was sustainable but it was hard to know. And I guess I was just wondering to the extent that you've seen this kind of aggressive activity in international markets or maybe aggregators are further along, have you seen sort of a diminution over time of the promotional intensity? And then just second, I had a clarification on the international comp. You said you thought value was part of the issue, but it was a ticket-driven comp. So is that something that your thinking should evolve to less ticket more traffic as there's an emphasis on value? Is that sort of the evolution we should expect to see?

Richard E. Allison -- President, Chief Executive Officer, Director

Hey, Sara, it's Ritch. On the aggregator question, what we've seen in the international markets, and your point is correct, we've seen a penetration of aggregators in those markets that has come earlier than we've seen it here in the U.S. What we've found is that in the markets where we are doing the things that we need to do to run our business, providing fast delivery, great consistent service to our customers and exceptional value, we found that we've been able to succeed and grow faster than the market even when aggregators have a very intensive presence in a particular city or country. So I continue to believe that much more of our success is going to be driven by our own actions and our own performance than it will be by the spending or the discounting or whatever the aggregators may ultimately do.

The second question around the international comp and the mix of traffic and ticket, those do tend to fluctuate over time. In 2018, all of the international comp was driven by traffic. This year, in the first quarter, it's been a mix and a bit more ticket-driven. My philosophy and our philosophy as a brand is that over time, the only healthy way to grow your business is to grow it through traffic. Ticket is a temporary way to grow your same-store sales. It may look good in the quarterly report but it doesn't help you to sustain and grow your business over the long-term, so we are always in dialogue with our international markets about making sure that we've got our value proposition dialed into the customer so that when they make their choice about where they want to buy their food, they come to us more often.

Sara Senatore -- Bernstein -- Analyst

Thank you.

Operator

Thank you. And our next question is from Dennis Geiger with UBS. (Operator Instructions). Thank you.

Dennis Geiger -- UBS -- Analyst

Good morning. Thanks guys for the question. Wondering if you could talk a bit more about the U.S. carryout business, given the increased focus you had there in recent quarters. Maybe just at a high level, if you could try and talk about the performance, how it's trended relative to delivery potentially given some of your comments on the aggregators. And then just anything you can comment as it relates to the benefit from fortressing on that carryout business.

Richard E. Allison -- President, Chief Executive Officer, Director

Yes, Dennis, carryout business continues to grow. And in fact, both our delivery and our carryout businesses grew in the first quarter. We continue to remain focused on carryout as a key strategic pillar in our business. And fortressing is really a -- it is one of the most important things that we can do to build that business, because our research tells us that customers really aren't willing to drive or walk or ride their bicycle very far to pick up a pizza. The maximum extent in most cities is about a mile that a customer is willing to go. So when we open these new units, the vast majority of that carryout business that we get is incremental. And back to some of the conversation that we had earlier around how we think about fighting against these new emerging competitors, these aggregators, this is a piece of the business that we can really own and terrific profits in that business. You don't have the same complexities and cost around managing the delivery side of the business. So very much remains a commitment for us to continue to develop and grow that segment of our business.

Dennis Geiger -- UBS -- Analyst

Great thanks.

Operator

Our next question comes from the line of Will Slabaugh with Stephens. Your line is open.

Will Slabaugh -- Stephens Inc -- Analyst

A question on the domestic business. You talked about the Points for Pies promotion being one way you're building the loyalty program, and I was wondering if you could speak to us where you stand today as it relates to monetizing that loyalty base through smarter and more personalized marketing messaging and just generally what the opportunity looks like with regard to that versus what you're able to do today.

Richard E. Allison -- President, Chief Executive Officer, Director

Sure, Will. The monetization of that loyalty base has really been happening for more than 3 years since we began, because we know that our loyalty customers order from us more frequently and significantly more frequently than the average customer. So our team, and once again driven by the data and analytical tools that we have, we are constantly looking for ways to continue to be more relevant to those customers in our loyalty program, such that we can increase the number of times that they do business with us over the course of the year. So I don't have specific initiatives to speak with you about this morning, but I can tell you that we are constantly trying things, running A/B tests, et cetera, to make sure that we're maximizing the potential of that now 20 million plus base of customers that are active in our loyalty program.

Operator

Our next question is from John Ivankoe with JPMorgan. Your line is open.

John Ivankoe -- JPMorgan -- Analyst

Yes, I think it's one related question with 2 parts. Firstly, on the international side, oftentimes, we see a slowdown in international development when comps flow and yet the first quarter was obviously an extremely strong period in terms of net unit openings. Is there an outlook for -- in '19 and '20? And I know you don't generally like to talk specifically of how many net openings we should expect from international given where current comps are and the issues that exist in a few markets.

Richard E. Allison -- President, Chief Executive Officer, Director

John, it's Ritch. The reason we're getting strong growth in our international business from a store count standpoint is that the unit economics are really strong. And so when we take a look at what drives store growth over the long-term, it really is all about the unit-level economics. So even though you make, you've made -- we were not at the comp level that we would like to see in Q1 at the 1.8%. We still got very strong unit economics across the vast majority of our markets. So that's where you really see the tie-in over the long term.

John Ivankoe -- JPMorgan -- Analyst

Okay. And then, secondly, obviously selling the New York company stores, 59 company stores, is important as it allows you to focus on fortressing other non-New York City markets. Is that going to happen with company store development? And how significant can company store development be as part of the near-term algorithm?

Richard E. Allison -- President, Chief Executive Officer, Director

So, John, when we take a look at our fortressing strategy, we're taking a look across the opportunities around the U.S. and we're constantly thinking about where can we grow and how do we want to grow? And a big part of that is figuring out who's the best owner and developer of those markets. And in the case of this New York sale, we happen to have 6 terrific franchisees who were very eager to grow their businesses. And selling these corporate stores to them gave them an opportunity to do that, both through the acquisition, but also through their forward commitment to continue to build and fortress in the New York area. And then what that allows us to do is to take the capital and energy that we would have spent continuing to build in New York, and we built quite a few stores in New York over the last couple of years. We'll take that capital and energy and we'll direct that at our remaining corporate markets, so we can continue to grow and to build the brand.

John Ivankoe -- JPMorgan -- Analyst

Thank you.

Operator

Thank you. (Operator Instructions) Our next question is from Peter Saleh with BTIG. Your line is open.

Peter Saleh -- BTIG -- Analyst

Great, thanks. It's been about 10 years now with the same $5.99 platform. Just wondering if the traffic momentum in the U.S. today is enough to support that $5.99 price point or are the franchisees pushing back and asking you guys to raise that value price point higher?

Richard E. Allison -- President, Chief Executive Officer, Director

Pete, it's Ritch. We have been on that $5.99 platform for a long time and from a consumer standpoint, it has been a huge driver of the growth in our business. Similarly, the $7.99 hero offer that we have around carryout has been consistent and been a big driver of our business. And one of the things that we see here in the U.S. and frankly, we also see it in our international markets around the world, consistency is really important in the minds of the consumer. They want to know on a Friday night when they want to feed their family, they want to know what it cost to buy a Domino's pizza.

So it's been a big driver, that's why we stuck with it for so long. With all that said, we are consistently looking at price points in our business. And if we were to find a price point that was better for our franchisees than $5.99, a price point that made more money for our franchisees than $5.99, then we would move to it. But it's not a decision that we sit around and make; it's a decision that our consumers make for us through the data and the research and the analytics that we apply against this just like we do every other decision we make in our business.

Peter Saleh -- BTIG -- Analyst

Thank you very much.

Operator

Our next question is from John Glass with Morgan Stanley, your line is open.

John Glass -- Morgan Stanley -- Analyst

Thanks very much. Rich, I believe in certain international markets Domino's franchisees do join aggregator networks just to source orders even if you provide the delivery. Has that been successful? And if it's been successful for them, why wouldn't you consider in the United States? Or do you think there's just a structurally difference in the market and that it's not applicable here even if it does work, if it does work in the international markets?

Richard E. Allison -- President, Chief Executive Officer, Director

Yes, John, you're right. We do work with our master franchisees do work with order aggregators in a dozen and a half or so markets around the world. I will reiterate that we deliver our own food everywhere. There's -- it is absolutely critical in my mind that we control the quality and the safety around our product versus handing it to some random third-party and then having no visibility into what happens to that food before it gets to the customer.

I will tell you that our success in using those order aggregators outside the U.S. has, frankly, been a mixed bag. We have some markets where I think they have done a very good job of working with some aggregators and doing that in a way that works alongside us and is consistent with their own strategies about how they grow their digital channels. But I'll also tell you that we've got some international markets that, frankly, haven't done a very good job of setting up the deals and the structure in terms of how they work with aggregators.

And we've tried to, based on the learnings across all of these markets, help our franchisees make better decisions. When I take a look at our U.S. business, I don't see any need for us to go onto these third-party platforms. We have an incredibly strong digital channel in our business. We're far and away the digital leader in pizza. We've got a loyalty program with 20 million plus active members, so it's just not clear to me why I would want to give up our franchisees margin or give up the data in our business to some third party, who will ultimately use it against us.

John Glass -- Morgan Stanley -- Analyst

Thank you.

Operator

Our next question is from Jeffrey Bernstein with Barclays. Your line is open.

Jeffrey Bernstein -- Barclays -- Analyst

Great, thank you very much. Rich. you mentioned in your earlier comments this is kind of around the U.S. a tough operating environment, wondering maybe if you could contextualize and it seems like with your 4% comp, seemingly quite pleased with that within your long-term range. What characteristics are you specifically referring to and maybe whether those have changed over time? And did you -- and just on that point did you mention -- I know you mentioned March Madness specifically in terms of maybe aggregators doing outsized advertising. Do you tend to see the pressure on your business specifically during those times or perhaps do you see it having more runway and maybe it's more of a steady basis whether there had to be advertising or not?

Richard E. Allison -- President, Chief Executive Officer, Director

Sure, Jeff. So first on the operating environment. It really does come down, first and foremost, to labor. It is, as all of you know, it is a really tight unemployment environment right now, and then we've all -- which drives a really healthy wage growth across the country. And then we've also got the dynamic in a few states and in a few cities, in particular, where we've had some pretty significant increases in minimum wage. So when I talk about the tough operating environment, it really is around labor cost but then also in terms of just the availability of labor. One of the things that I travel around and visit a lot of stores, and one of the best ways to grow sales in our stores is just to put more drivers on the payroll, quite frankly, and serve the demand that we have, so that's what I refer to when I talk about the operating environment. Commodities have been fairly benign. We haven't seen, as with a few exceptions, we haven't seen a lot of significant cost pressure there.

And then your second question around the March Madness. I don't know that, that's a recurring pattern year-on-year, but really what we saw in the first quarter was very heavy spend on advertising and resulting share of voice on the part of either aggregators advertising directly to the consumer, or with that being part of and coupled with another QSR brand, whether advertising delivery is a channel for that brand. And we know there is a lot of activity in that space as some of these players work hard to raise capital or potentially position themselves to go public. So that's what we saw in the first quarter.

Jeffrey Bernstein -- Barclays -- Analyst

Thank you.

Operator

Our next question is from Alton Stump from Longbow Research. Your line is open.

Alton Stump -- Longbow Research -- Analyst

Thank you. Actually, just a quick modeling question I suppose for Jeff. I didn't hear you making any change to either G&A or CapEx guidance for the full year. How should we think about the sale of the 59 stores, if there may be any change to either of those metrics for the year?

Jeffrey Lawrence -- Chief Financial Officer, Executive Vice President

Yes, Alton, it is Jeff. We have no change to the G&A guidance that we gave you in January, which is $390 million to $395 million, and no change to the CapEx guidance, $110 million to $120 million. What I can tell you is when we report more fully on the New York sale in Q2 when we speak with you all in July, we'll have assessed all that and if there is a need to change that guidance, we will give it to you at that point. On a completely unrelated note, and you didn't ask this question, earlier in my prepared remarks I mentioned that interest expense decreased $4.8 million, actually I should have said increased due to the higher average debt balance from our 2018 recap. So even though you didn't ask that one, I just wanted to clean up that little faux pas there.

Alton Stump -- Longbow Research -- Analyst

Great, thank you.

Operator

And our next question is from Stephen Anderson with Maxim Group. Your line is open.

Stephen Anderson -- Maxim Group -- Analyst

Yeah, so, good morning. I wanted to follow-up with your New York asset sale. Do you have any other urban markets where you have a concentration of company-owned stores where you think you may be able to see any kind of similar transaction?

Richard E. Allison -- President, Chief Executive Officer, Director

Yes, Steve, it's Ritch. We don't have any plans to do anything with our additional corporate store markets today. We remain committed to building stores in those markets and to fortressing them. We've got a history, if you look back over, gosh, the last couple of years or even the last decade, we've got a history of building corporate stores and opportunistically selling corporate stores over time. Just last year, we sold some stores down in the North Carolina market, you may recall. So back to one of the things I was saying earlier, we take a look at the portfolio across the U.S. and we assess who is the best owner and developer of those markets as we work our way toward our 8000-store goal by 2025, and so we're going to build stores, we're going to sell stores over time, we're going to work with our franchisees on development agreements to get to the ultimate goal.

Stephen Anderson -- Maxim Group -- Analyst

Thank you.

Operator

Our next question is from Andrew Charles with Cowen & Company. Your line is open.

Andrew Charles -- Cowen & Company -- Analyst

Great, thank you. Ritch, it appears in this year's FDD that the projected number of domestic franchise openings is likely to slow after you've experienced 7 consecutive years of increases. I'm just wondering just given the visibility you have into the pipeline as well as the health of the franchisees you highlighted with the step up in store level EBITDA from 2017 to 2018 beyond what you originally anticipated at the Investor Day. What do you attribute the slow down in projected openings to?

Richard E. Allison -- President, Chief Executive Officer, Director

Andrew, rather than trying to find some golden nugget in the FDD, I just encourage you to do the hard work to look at the unit economics in the business. That's what drives the store growth over time and as we mentioned on the call earlier and as you'll see in our reporting for this quarter, we've had a really nice increase in our global pace of store growth. And you've seen very strong store growth in the U.S. for the first quarter very consistent. That's what's going to drive it. We look forward, and we still feel very confident in our 6% to 8% unit growth.

Operator

And our next question is from Jon Tower with Wells Fargo . Your line is open.

Jon Tower -- Wells Fargo -- Analyst

Hey, thanks for taking the question. Ritch, you spoke earlier about Domino's not being interested in using third-party platforms in the U.S. for listing or delivery services. And at the same time, a little bit later, you spoke about the high cost operating environment, specifically around labor cost. A large franchisee for one of your competitors recently spoke about seeing a nice labor arbitrage by using third-party delivery in some of these higher cost markets, specifically New York, without seeing any sort of service issues. So maybe your situation is unique, but if this is the case potentially for your company, why not let franchisees explore this avenue for delivery at some point down the line?

Richard E. Allison -- President, Chief Executive Officer, Director

Yeah Jon, I can't comment on the cost structure of a competitor and what their trade-off might be, but I can tell you that every time we look at this, we are the lower cost delivery channel versus using some other third-party aggregator in our business and frankly, we're probably advantaged in that relative to the other players simply by the fact that we've got significantly more scale. And what really drives that cost per delivery is the number of deliveries per hour that we can get per driver and the distance that we ask those drivers to take the food away from our restaurants. And it comes back to what we're trying to do on our fortressing program of really shrinking down these delivery areas and making sure that we not only improve our service, but we continue to be the lowest-cost delivery provider.

And then the other element of it, which I just can't emphasize enough, is that we really, at our company, place a high level of importance on the quality and the safety of the product that we bring out to our customers. And I'd have a tough time sleeping at night if I was handing our food to an untrained, random third-party driver to then carry that over to our customer, because what happens when you have a service failure or you have a product quality problem in that situation? Who's to blame? And I really like the closed system and the control that we have, that our franchisees have, around making sure that the great pizzas that they're producing every day get to the customer hot and fresh and delivered by uniformed Domino's Pizza driver.

Jon Tower -- Wells Fargo -- Analyst

Thanks.

Operator

Thank you. And I'm not showing any further questions. I'll now turn the call back over to Ritch Allison for closing remarks.

Richard E. Allison -- President, Chief Executive Officer, Director

Well, thanks, everybody, and we look forward to discussing our second quarter 2019 results on Thursday, July 18.

Operator

Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone, have a great day.

Duration: 50 minutes

Call participants:

Timothy McIntyre -- Executive Vice President Communications, Investor Relations and Legislative Affairs

Jeffrey Lawrence -- Chief Financial Officer, Executive Vice President

Richard E. Allison -- President, Chief Executive Officer, Director

Brian John Bittner -- Oppenheimer -- Analyst

Matthew James DiFrisco -- Guggenheim Securities -- Analyst

Gregory Ryan Francfort -- BofA Merrill Lynch -- Analyst

Alec -- Stifel -- Analyst

David Tarantino -- Baird -- Analyst

Sara Senatore -- Bernstein -- Analyst

Dennis Geiger -- UBS -- Analyst

Will Slabaugh -- Stephens Inc -- Analyst

John Ivankoe -- JPMorgan -- Analyst

Peter Saleh -- BTIG -- Analyst

John Glass -- Morgan Stanley -- Analyst

Jeffrey Bernstein -- Barclays -- Analyst

Alton Stump -- Longbow Research -- Analyst

Stephen Anderson -- Maxim Group -- Analyst

Andrew Charles -- Cowen & Company -- Analyst

Jon Tower -- Wells Fargo -- Analyst

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