the revenue quality breakdown and the DMP-driven bear case were the sharpest parts for me. A few questions if you have a minute:
1. Your DMP analysis quantifies the royalty income lost from Japan/France closures. Given the Q1 2026 print showed global international same-store sales turn negative (not just DMP markets), does that change your closure-driven read, or do you see it as still contained to over-expanded pandemic-era markets?
2. Your valuation framework assumes ~8% FCF/share growth, with U.S. same-store sales coming in at 0.9% in Q1 2026 (vs. the 3% target), does that growth assumption still hold, or does it need revising downward?
3. You frame the value equation and network density as durable moat pillars, but Q1 2026 showed competitors matching Domino’s discounting directly. Does that change your view of how durable the “value equation” pillar actually is, or do you see it as a temporary competitive response?
4. Given your Ulta experience, it sounds like you’d read the Berkshire exit as reallocation noise rather than signal, especially since it’s tied to Greg Abel’s broader Q1 2026 portfolio reset (16 positions cut) rather than a DPZ-specific call. Does the fact that the exit coincided with a genuinely weak quarter change that read at all, or do you think the two are unrelated?
On your first question, the Q1 2026 international same store sales decline of 0.4% is worth separating from the DMP specific situation. The DMP closures are a structural issue driven by over expansion during the pandemic in specific markets, Japan and France, where the unit economics broke down when demand normalised. The broader international same store sales softness is a different animal; it reflects macroeconomic pressure across multiple markets, consumer affordability constraints, and in some cases unfavourable currency dynamics. The two can coexist without one explaining the other. I still read the closure risk as largely contained to the over expanded pandemic era markets, but I am watching whether the international SSS softness persists beyond Q2 2026. If it does, it starts to become a thesis question rather than a macro noise question.
On the 8% FCF per share growth assumption, one quarter at 0.9% U.S. same store sales does not move the needle on a decade long estimate. The 8% is built from approximately 5% operational growth and approximately 3 percentage points from buybacks. The operational component is not solely dependent on same store sales, it includes international unit expansion, the refranchising margin tailwind, and the compounding royalty base from new store openings. That said, if U.S. same store sales consistently track below 2% over the next quarters rather than recovering toward 3%, the operational component drops and the overall estimate moves lower.
On the value equation and competitive discounting, I would not read one quarter of matched discounting as evidence that the moat is weakening. competitors have always had the ability to discount. but can they sustain it without destroying their own unit economics?. Domino's supply chain advantage gives its franchisees a structurally lower food cost than competitors, which means it can price aggressively for longer without the same margin impact. If competitors are matching Domino's discounting in Q1 2026, they are doing so at greater cost to their own franchisee economics.
That said, I want to be honest about something I am watching. Pizza chains broadly are facing tough times. Pizza Hut's same store sales have been declining consistently, and the recent spin off from Yum Brands raises real questions about the category's structural position. Fast food pizza may not occupy the same place in the consumer's mind that it did a decade or two ago, between aggregator platforms changing ordering habits, healthier food options proliferating, and younger consumers showing different preferences, the category headwinds are real. Domino's is outperforming within that context, which says something genuine about the brand and the execution. But I am watching it closely precisely because of this. A company that is doing well while its category struggles is either genuinely differentiated or the last one standing. The evidence today points to genuine differentiation. I want to see that confirmed over the next several quarters before I become more confident.
On the Berkshire exit, the Greg Abel portfolio reset context matters. I dont view the sixteen positions cut simultaneously as a signal about any one business, but is more about a portfolio restructuring at the top. The coincidence with a weak quarter is exactly that, a coincidence of timing. I read it as reallocation noise.
Sorry if my reply was lengthy, you had some sopt on questions that deserved to be discussed in detail. Have a good day.
I’ll share something personal. I bought Ulta Beauty just after Buffett exited his position. For a second, I doubted myself, if he’s selling, what does he know that I don’t? I held and soon Ulta doubled. I assume he exited for reasons that had nothing to do with Ulta’s quality or valuation, internal portfolio decisions, reallocation, timing. We rarely know the full picture behind an institutional exit.
Really enjoyed this thank you!!
the revenue quality breakdown and the DMP-driven bear case were the sharpest parts for me. A few questions if you have a minute:
1. Your DMP analysis quantifies the royalty income lost from Japan/France closures. Given the Q1 2026 print showed global international same-store sales turn negative (not just DMP markets), does that change your closure-driven read, or do you see it as still contained to over-expanded pandemic-era markets?
2. Your valuation framework assumes ~8% FCF/share growth, with U.S. same-store sales coming in at 0.9% in Q1 2026 (vs. the 3% target), does that growth assumption still hold, or does it need revising downward?
3. You frame the value equation and network density as durable moat pillars, but Q1 2026 showed competitors matching Domino’s discounting directly. Does that change your view of how durable the “value equation” pillar actually is, or do you see it as a temporary competitive response?
4. Given your Ulta experience, it sounds like you’d read the Berkshire exit as reallocation noise rather than signal, especially since it’s tied to Greg Abel’s broader Q1 2026 portfolio reset (16 positions cut) rather than a DPZ-specific call. Does the fact that the exit coincided with a genuinely weak quarter change that read at all, or do you think the two are unrelated?
Thank you, really glad it resonated.
On your first question, the Q1 2026 international same store sales decline of 0.4% is worth separating from the DMP specific situation. The DMP closures are a structural issue driven by over expansion during the pandemic in specific markets, Japan and France, where the unit economics broke down when demand normalised. The broader international same store sales softness is a different animal; it reflects macroeconomic pressure across multiple markets, consumer affordability constraints, and in some cases unfavourable currency dynamics. The two can coexist without one explaining the other. I still read the closure risk as largely contained to the over expanded pandemic era markets, but I am watching whether the international SSS softness persists beyond Q2 2026. If it does, it starts to become a thesis question rather than a macro noise question.
On the 8% FCF per share growth assumption, one quarter at 0.9% U.S. same store sales does not move the needle on a decade long estimate. The 8% is built from approximately 5% operational growth and approximately 3 percentage points from buybacks. The operational component is not solely dependent on same store sales, it includes international unit expansion, the refranchising margin tailwind, and the compounding royalty base from new store openings. That said, if U.S. same store sales consistently track below 2% over the next quarters rather than recovering toward 3%, the operational component drops and the overall estimate moves lower.
On the value equation and competitive discounting, I would not read one quarter of matched discounting as evidence that the moat is weakening. competitors have always had the ability to discount. but can they sustain it without destroying their own unit economics?. Domino's supply chain advantage gives its franchisees a structurally lower food cost than competitors, which means it can price aggressively for longer without the same margin impact. If competitors are matching Domino's discounting in Q1 2026, they are doing so at greater cost to their own franchisee economics.
That said, I want to be honest about something I am watching. Pizza chains broadly are facing tough times. Pizza Hut's same store sales have been declining consistently, and the recent spin off from Yum Brands raises real questions about the category's structural position. Fast food pizza may not occupy the same place in the consumer's mind that it did a decade or two ago, between aggregator platforms changing ordering habits, healthier food options proliferating, and younger consumers showing different preferences, the category headwinds are real. Domino's is outperforming within that context, which says something genuine about the brand and the execution. But I am watching it closely precisely because of this. A company that is doing well while its category struggles is either genuinely differentiated or the last one standing. The evidence today points to genuine differentiation. I want to see that confirmed over the next several quarters before I become more confident.
On the Berkshire exit, the Greg Abel portfolio reset context matters. I dont view the sixteen positions cut simultaneously as a signal about any one business, but is more about a portfolio restructuring at the top. The coincidence with a weak quarter is exactly that, a coincidence of timing. I read it as reallocation noise.
Sorry if my reply was lengthy, you had some sopt on questions that deserved to be discussed in detail. Have a good day.
Another great piece, thank you Omar!
Thank you, I am glad you enjoyed it.
I made it 2% of my portfolio at 400. Down 22% now. Should I hold or cut my losses?
Why would Berkshire sell then?
I’ll share something personal. I bought Ulta Beauty just after Buffett exited his position. For a second, I doubted myself, if he’s selling, what does he know that I don’t? I held and soon Ulta doubled. I assume he exited for reasons that had nothing to do with Ulta’s quality or valuation, internal portfolio decisions, reallocation, timing. We rarely know the full picture behind an institutional exit.