How did Domino's Pizza manage to grow its gross profit in Q4 2024 despite rising costs?

Domino's Pizza maintained a stable gross margin of 39.28% in Q4 2024, which is a testament to the company's effective cost management and pricing strategies despite rising costs. Here are the key factors that contributed to Domino's success in maintaining its gross profit margin:

1. **Revenue Growth**: Domino's Pizza experienced a slight increase in total revenue by 3% year-over-year in Q4 2024, reaching $1.44 billion. This growth in revenue helped offset the impact of rising costs.

|code|Ticker|Name|Date|Total Revenue YoY|market_code|
|---|---|---|---|---|---|
|DPZ|DPZ.O|Domino'S Pizza|2024 Q1|5.881405469358589|185|
|DPZ|DPZ.O|Domino'S Pizza|2024 Q2|7.135181875941196|185|
|DPZ|DPZ.O|Domino'S Pizza|2024 Q3|5.135293241616141|185|
|DPZ|DPZ.O|Domino'S Pizza|2024 Q4|2.9182335784320714|185|

2. **Cost Management**: The cost of goods sold (COGS) also increased by 1.9% year-over-year, amounting to $878.06 million. However, Domino's managed to maintain its gross margin by effectively controlling the rate of increase in COGS compared to revenue growth.

|code|Ticker|Name|Date|Cost of Goods Sold YoY|market_code|
|---|---|---|---|---|---|
|DPZ|DPZ.O|Domino'S Pizza|2023 Q4|-1.8670686216156043|185|
|DPZ|DPZ.O|Domino'S Pizza|2024 Q1|3.745161234779315|185|
|DPZ|DPZ.O|Domino'S Pizza|2024 Q2|6.570307320826297|185|
|DPZ|DPZ.O|Domino'S Pizza|2024 Q3|4.31982606263271|185|

3. **Pricing Strategies**: Domino's implemented pricing strategies that balanced the need for revenue growth with customer affordability. For instance, in the U.S., the company saw an increase in average pricing by 3.9% during Q2 2023, which was moderated to approximately 2% in Q4 2024. This strategic pricing helped in maintaining the profitability of the company.
4. **Operational Efficiency**: Domino's continued to focus on operational efficiency and cost recovery measures. The company's international business, although facing challenges, has seen a positive trend in same-store sales and net store growth. The U.S. business remained strong, with positive order counts for the fourth consecutive quarter, driven by carryout and delivery services.
5. **Innovation and Product Launches**: Domino's recent product innovations, such as the launch of new Mac & Cheese and Pepperoni-Stuffed Cheesy bread, have been well-received and are expected to contribute to future revenue growth. New and innovative products can help maintain customer interest and pricing power.

In conclusion, Domino's Pizza's ability to grow its gross profit in Q4 2024 despite rising costs can be attributed to a combination of factors including revenue growth, effective cost management, strategic pricing, operational efficiency, and innovative product launches. These measures collectively helped Domino's maintain its gross margin and continue to deliver profitable growth.