Stocks

Domino’s Pizza…Now I Really Understand

Two weeks ago Domino’s Pizza (DPZ) posted weaker-than-expected sales during the second quarter. Same-store sales grew at 3% vs expectations of 4.6% domestic. Same-store sales internationally grew 2.4%, but also missed analyst expectations for 2.6% growth. On the news the stock price was fell 9%.  This marks the second consecutive quarter where Domino’s disappointed Wall Street. 

Same store sales decreasing is indirectly part of Domino’s “fortress” strategy.  Domino’s is under attack by the food delivery companies in which stay at home diners have a lot more options at their disposal.  So Domino’s is aggressively adding store at the sacrifice of existing stores the clear risk of saturating its existing territories.   The “fortress” strategy is to control the experience of getting the pizza quickly and hot to the customer.  I could understand getting the pizza there quickly and now I completely understand why they won’t to deliver their own pizza.

U.S. Foods, one of the country’s biggest food services companies, conducted a survey of over 1,500 American adults who use food delivery apps and 497 food delivery workers to highlight the emerging industry.

One jarring finding: 28% of deliverers said that they have actually eaten food from the orders they were supposed to deliver.

The biggest complaints among customers? Food that’s not warm and fresh took the top spot, followed by late food and incorrect orders. And in order to ensure freshness and quality, 85% of customers said that they would like the restaurants to provide tamper-evident labels.

Source

Not only do I love Domino’s pizza, but I love how they use technology to stay ahead of the competition.  I do anticipate them finding their lane within this growing new field of food delivery longer term.  However, short term, the chart suggests, the stock price has room to  fall to the weekly demand at $227.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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