Domino's sees $1 billion in new sales from aggregators like Uber Eats, eventually

By Tomi Kilgore

Pizza chain's deal with Uber Eats follows eight straight quarters of declining delivery same-store sales

Domino's Pizza Inc. shares rallied toward an 11-month high Monday as the pizza chain was upbeat about its recently announced collaboration with Uber Eats, saying that entering the aggregator marketplace could add $1 billion in new sales.

The upbeat comments, and the indication that the company will announce similar deals down the road, followed the reporting of second-quarter results in which Domino's (DPZ) beat profit expectations but missed on revenue, as delivery same-store sales declined for an eighth straight quarter.

U.S. delivery same-store sales fell 3.5% from a year ago, even after having dropped 11.7% in the second quarter of 2022. The last time the company reported growth in delivery same-store sales was the second quarter of 2021, according to FactSet data.

"The U.S. delivery business continues to be challenged," said Chief Executive Officer Sandeep Reddy in the post-earnings conference call with analysts, according to an AlphaSense transcript. "We expect [third-quarter] same-store sales trends in our delivery business to be challenged, similar to [the second quarter]."

He expects a "slight improvement" in trend in the fourth quarter, as the company's updated loyalty program rolls out and because of expected transaction growth from the Uber Eats partnership.

Domino's stock initially dropped as much as 5.3% in premarket trading in the first minutes following the release of results but reversed course to rally 2.2% in midday trading. That put the stock on track to close at the highest price since Aug. 25, 2022.

When the Uber Eats agreement was announced on July 12, the stock soared 11.1% as investors cheered the change from Domino's long-held stance against working with food-delivery aggregators.

Chief Executive Officer Russell Weiner said on the call that research from Circana shows that aggregator sales for delivery for quick-service pizza restaurants has reached almost $5 billion for the year ending in May.

"We plan to get our fair share of this market over time," Weiner said. "The opportunity represents over $1 billion in incremental sales for our U.S. business."

Weiner said the $1 billion number comes from the idea that whenever Domino's competes "vigorously" in a category, it expects to get its "fair share" of that market. And the company's current share of the delivery market is one out of three.

"The $1 billion is a signal of our fair share of the entire $5 billion U.S. aggregator pizza delivery business," Weiner said. "And so obviously, that's something that would happen when we get on to the broader competitors in the platform, which we intend to do at some point."

Domino's stock has run up 19.2% over the past three months, while the S&P 500 has advanced 10.2%.

-Tomi Kilgore

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07-25-23 0755ET

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