Sales of Domino’s Pizza pizza chain have become too good

Domino’s Pizza Inc. (DPZ), a popular pizza chain, has benefited from rising demand during self-isolation during the COVID-19 period. Moreover, the increased demand has persisted, and the company is increasing sales and servicing costs for an increasing number of orders. Therefore, the fears of some investors were not justified. Furthermore, after the end of strict restrictions and the opening of restaurants, many consumers did not change their new habits and continued to order pizza at Domino’s Pizza.

 Thus, the forced influx of consumers and increased orders became consumer preference. The number of food purchases with delivery or pickup remains high. Domino’s retail sales in the quarter ended in September 2021 increased by 10%, while even during restrictions in 2020, the growth was about 14.5%. Sales growth is a positive factor, but Domino’s expenses also grow simultaneously. 

More orders mean the need to hire additional staff. In addition, food prices are rising in the United States, and Domino’s food basket in 2022 may increase the price by 8-10% compared to last year. A growth 3-4 times greater than usual. Like many other companies, the US labor market and Domino’s raise wages. 

Unlike some competitors, Domino’s has so far refrained from raising prices for consumers and instead intends to reduce costs and reduce portions without changing the price. An additional means of reducing costs are promotions for online sales, which allow you to reduce the number of phone calls and operators’ workload for accepting orders. Such a “hidden” increase in the financial burden on consumers is unlikely to lead to a significant outflow of customers. 

In addition, Domino’s has a historically high operating margin – it has fluctuated in the range of 15-19% over the past decade.