Retail

Will Domino's See Its Dominant Streak Last Another Quarter?

Domino's Earnings - Pizza QSRs

While it has been a bad year for almost everyone else, quick-service pizza has thus far been having something of a blockbuster year. And with the latest earnings result expected on Thursday from Domino’s, the question arises: Can the company keep the hits coming as the economy turns toward a Q4 where a lot of things are looking incredibly uncertain?

Increasingly, the data around that question is pointing to yes: It is looking like Domino's will likely have more good news to announce when the number drops tomorrow — and despite the uncertainty ahead, things are looking pretty good for the pizza chain. And while Domino's deserves a lot of the credit for seeing success in a tough time, they got a big assist from being in the right industry, and being ready to meet a very specific customer's need at just the right time. And it's a need, as PYMNTS' recent data indicates, that is likely to persist well into 2021.

The Golden Age of American Pizza

It’s been a bad year for most industries. Restaurants in general been hit very hard, but pizza has been the unusual outlier across the board all year, with some going so far as to anoint 2020 the “golden era for pizza chains.” As it turned out, pizza parlors came into the pandemic period with a built-in advantage: They barely had to make any kind of digital pivot, because they have spent the last several decades bulking up their ability to offer deliver and carry-out of their product, with an increased focus on digital over the last several years. And Domino's has very much led that trend.

For example, the firm was able to roll out carside delivery very quickly across the board at its locations after the pandemic hit — in many cases several months before many others in the QSR space were able to make the move. Why? Domino's had already been working on it for a year or so in pilots. The plan had been for a slow, phased rollout over the course of 2020. Then the pandemic hit hard, and Domino’s shifted to a rapid rollout, combining its pre-existing delivery skills with an inexpensive and popular menu. That meant while most big brands were reporting horrible revenue hits during the second quarter of this year, Domino's was one of the few big U.S. firms to report a bonafide revenue surge.

And the company has stayed pretty busy since March, with rollouts to enhance its offerings to a suddenly captive audience of homebound consumers. There was the unforgettable rollout of the pizza pedestal, a tiny cardboard resting place that enables the delivery person to leave a piping-hot pizza slightly suspected above the cold ground without having to hand it to a customer. Domino's is also on the shortlist of firms to announce it was going on a hiring binge in response to COVID-19, with plans earlier this year to bring on 20,000 new workers to meet growing demand.

“It's a privilege to be able to feed families across the country and provide them with a small sense of normalcy during this pandemic," Tom Curtis, Domino's executive vice president of operations and support, noted in a statement. "We realize these are tough times, and not only do we want to maintain strong service levels, but we also want to provide opportunities to those who have lost their jobs or are facing reduced hours."

Apart from the digital sales surge it reported in its Q2 earnings release, Domino's also talked up its recent ordering integrations with Google Home, Facebook Messenger, Apple Watch, Amazon Echo and Twitter, highlighting its commitment to enable consumers to access pizza from any channel. In the vein of improvements, the chain also announced it would expand its store count.

"Our focus as a global brand and the commitment of our local operators remains steadfast on serving our customers and our communities with a convenient, affordable and safe food and service experience," said Richard Allison, the Domino's CEO, in a press release.

The Tailwinds In Consumer Preference That Keep on Blowing 

Though dine-in locations have officially reopened in some capacity in most U.S. cities, thus far diners have shown some reticence in returning.

"As the summer progressed and mandated restrictions were lifted, an increasing number of consumers became more comfortable dining out based on the safety protocols restaurants put in place. After months of staying at home and cooking their own meals or ordering in, they were ready for the restaurant experience again," said David Portalatin, NPD’s food industry adviser.

Well, some were ready, but clearly not all, as the number of consumers dining at restaurants was still down by double digits as of the end of August.

In over six months of surveys of 30,000+ U.S. consumers on their shopping and dining behaviors, PYMNTS found that an ever-increasing sample of consumers are shifting their once firmly physical habits to digital channels, and they plan to stick with them beyond the pandemic.

And those customers expect the pandemic period to last for quite a long time. As of September, the majority of consumers think we are still over a year (371 days to be exact) from seeing the light at the other end of the COVID-19 tunnel. And for the vast majority, "over" means a vaccine has been developed, approved and is readily available to consumers.

Until then, 45 percent of consumers say they just don't feel safe enough to go back to dining in person — and will carry on with their digital ordering ways.

Which, of course, is very good news for Domino's. Because for the last half-year, most of its QSR competitors have been racing to go digital, while Domino's has had a chance to perfect the offering. And given the increasing stack of data that suggests digital ordering will be on the menu for a mass of consumers going into the last quarter of the year, combined with the fact that inexpensive prices are a key value for most consumers, Domino's seems poised to continue its surge while others struggle to evolve with the times.

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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