Demand-Sensitive Delivery Business Weighs on Domino's Results, but Long-Term Prospects Intact

COVID-19 drove sweeping changes across the restaurant industry, with operators scrambling to provide delivery integration, build out e-commerce platforms, and pivot to digital-driven models. For Domino's, which had already implemented the lion share of these initiatives, very little has changed. While the reopening of dine-in options has weighed on recent results, the firm has taken 220 basis points of market share in the quick-service restaurant, or QSR, pizza category since 2019, seeing its share of global sales swell to 20.6% in 2022, according to Euromonitor data and our calculations. While we expect a turbulent couple of quarters, with the firm absorbing margin pressure to defend its value proposition with a lower-income clientele, we view the firm's long-term emphasis on defending franchisee profits, supporting the firm's growing carryout business, and building store density at the market level (fortressing) as prudent.