There are now a number of food delivery companies, but Domino’s and other pizza delivery companies were the first.
Domino’s Pizza is the world’s largest pizza chain and it is currently feeling a bit of pressure from food delivery companies like DoorDash, GrubHub and Uber Eats who deliver food from a variety of restaurants (ref WSJ). Domino’s recently reported same-store sales growth of 2.4% which was slightly below what analysts had expected. In addition, the company is projecting same-store sales at between 2-5% over the next 2-3 years, down from its earlier projection of 3-6% for 3-6 years. Domino’s CFO Jeffrey Lawrence cites “aggressive competitor activity” as the reason and has indicated that it will counter those moves by expanding its number of stores. Having more stores will assist in delivering food more quickly and protect against upstart competition, the company indicates. Domino’s also announced a $1 billion share repurchase authorization – something that the newer delivery services won’t be doing anytime soon. The repurchase will account for 10% of the company’s current market value. And, even with the lowered guidance, shares are trading at 24 times forward earnings – significantly higher than the S&P 500 which trades at 17 times earnings. Here’s a hearty shout-out to Domino’s for doing well over the long haul by managing all those moving parts.