Domino's Pizza Says Winning
According to Yelp’s latest Local Economic Impact Report, as mid-June 140,000 businesses listed on the Yelp remained closed due to the coronavirus pandemic. And of all the business closures since March, 41% of them have permanently closed.
As lawmakers start kicking around more stimulus packages for the America people, one proposal that President Donald Trump discussed with restaurant executives in late May was to give Americans willing to travel domestically over the next few months a tax credit. The Explore America tax credit would be used for domestic travel, including visits to restaurants.
The Explore America tax credit isn’t so crazy. Across the pond in England, Chancellor of the Exchequer Rishi Sunak once it deploy a “Eat Out to Help Out ” bill that will entitle every diner to a 50% discount of up to £10 per head on their meal at any restaurant in the country, including upscale venues. So when you dine out, British people will pay half and Government will pay the other half in an attempt to get them out and spending.
Something better be done quickly because more and more restaurant businesses are closing. Just this week, NPC International, which operator 1200 Pizza Huts and close to 400 Wendy’s restaurants in the United States filed for bankruptcy. The unfortunately part is that another 40,000 people who work for NPC International could be on the unemployment lines unless something is done quickly.
Then there is Shake Shack…the burger place known for their hot dogs, chicken, gourmet burgers and crinkle cut fries. Yesterday, Shake Shack said temporary store closures, nationwide curfews and stores that were opened, but had reduced hours lost $3.2 million in sales in June and for the quarter, sales dropped 49% year-on-year due based on traffic declining by 60%.
Then there is the McDonald’s, which decided to delay reopening its dine-in restaurants for 21 days…we are talking about 12,000 out of 14,000 McDonald’s that offer dining services that will remain closed.
It seems like only yesterday that investors were cheering consumers’ return to restaurants. Actually, it was last month, but a resurgence in coronavirus cases in many parts of the country has curbed diners’ appetites.
Jefferies analyst Andy Barish takes a look at recent foot-traffic data, which shows a deceleration in recent weeks for both fast-casual and fast-food restaurants—although he argues that there are still stocks to buy in the sector.
Fast-food and quick-service restaurants have been faring better, with only modest decelerations in traffic, given that they were more easily able to pivot to take out and delivery. Barish writes that the companies that are more leveraged to digital ordering and delivery, like Wingstop (WING), Chipotle Mexican Grill (CMG), Domino’s Pizza (DPZ), and Papa John’s International (PZZA) are the best-positioned players.
Just like Tesla isn’t a car company, Domino’s isn’t a pizza joint, it’s a technology company. For decades Domino’s has been using technology to give customers a seamless experience.
Domino’s has been testing Ford-built, self-driving delivery vehicles in Michigan and Miami for several years. Last year, Domino’s announced autonomous-vehicle startup Nuro will make a custom driverless fleet of cars for pizza deliveries in Houston later this year.
Then there is the company’s voice-recognition system, “Dom,” has been automating telephone orders since 2014 to the tune of a half-million orders.
More than 60% Domino's sales come through digital channels. All digital orders run through Domino's custom operating system. The data collected through the system became a "competitive advantage," which helped launch a loyalty rewards program. And with the Tracker application, anybody placing an order can track the pizza making process, including receiving alerts when the pizza is baking, traveling with the driver and being delivered.
And now their fortress strategy is starting to have a halo effect. In recent years, Domino’s has come under attack by the food delivery companies that popped up in the last couple of years in which stay at home diners have a lot more options at their disposal. Domino’s has been very vocal about not wanting third party vendors to delivery their pizzas.
Despite Domino stores cannibalizing each other, having more locations means closer proximity to diners, which generates lower delivery times and boosts customer satisfaction. Hence the fortress strategy… more stores equates to being closer to the customer, which equates to faster delivery times. With over 6,000 stores in the US and more and more restaurants closing, Domino’s can offer easier carryout and faster delivery than the competition.
The chart suggests Domino's Pizza is a buy at the daily demand at $340.
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.
Posted Using LeoFinance
