Domino’s Pizza, Inc. (NYSE:DPZ) will almost certainly profit from strong comps growth, technical advancements, and unit expansion activities. This, combined with the emphasis on menu additions, bodes well. However, inflationary pressures and workforce issues are a source of concern.

Let’s go over the reasons why investors should hold Domino stock for the time being.

Factors Influencing Growth

With robust worldwide comps growth, Domino’s continues to impress investors. Global retail sales (including total franchise and company-owned units) climbed 2.2% on a year-over-year basis in the fiscal first quarter. The increase was driven by greater US store sales (up 5.1% year on year). Excluding foreign currency effects, worldwide retail sales climbed 5.9% from the previous quarter. Domino’s comps increased 7.3% year over year at domestic company-owned stores, compared to a 10.5% decline in the prior quarter. Comps at international retailers increased 1.2% year on year, excluding foreign-currency translation. During the quarter, the firm announced the benefits of lapping Omicron (beginning in 2022) and the addition of a boost week (beginning in 2023).  

To boost sales, Domino’s spends extensively on technology-driven initiatives such as digital ordering. Piece of the Pie Rewards, Domino’s digital loyalty program, continues to contribute significantly to traffic growth. Domino’s expanded pizza ordering options have put the company at the forefront of digital ordering and customer convenience. Other digital changes were added to improve the consumer experience, including ordering, selecting service options, paying, and tipping. The company began rolling out electric vehicles for pizza delivery in the first quarter of fiscal 2023. Aside from that, improved make-line and cut-table technology, as well as AI-enabled forecasts, are being implemented to better match demand with capacity. The initiatives are likely to improve service speed, accuracy, and efficiency.

Increased emphasis on menu additions is a good thing. During the first quarter of fiscal 2023, the firm announced the launch of a potato side dish, Loaded Tots, and received positive feedback. The company reported a good ticket drive for its franchisees, backed by its high-margin profile. It also exceeded earlier product introductions of Dips & Twists, as well as the Chicken Taco and Cheeseburger specialty pizzas. Given the connection with the business’s Mix & Match menu, the management is optimistic about this project and expects it to generate an incremental margin dollar lift in the coming periods.

Domino’s generates a significant portion of its sales outside of the United States, so the firm is committed to expanding its presence in high-growth international countries to increase business. Because of superior unit-level economics, the company’s international expansion is strong and diverse across markets. The company added 22 net new stores in the United States during the fiscal first quarter, bringing the total number of system stores in the United States to 6,708 outlets. 106 net new stores were added to its foreign operations during the quarter. It is also optimistic about its two- to three-year forecast of 5-7% annual global net store growth.

Domino stock has dropped 18% in the last year, while the industry has up 20.1%. The negative impact was mostly due to inflationary pressures and staffing issues. Although the corporation has taken steps to enhance staffing levels, full recovery is expected to take time. The company is wary of the current uncertain macroeconomic situation.

Featured Image: Pexels @ Esmihel Muhammad

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