Domino’s Pizza, the world’s largest pizza company, is the only restaurant stock that is trading positively this year as investors bet that more consumers will stay in and order pizza delivery during the COVID-19 outbreak. While shares of Starbucks and McDonald’s have fallen in the double digits, Domino’s stock is up nearly eight percent in 2020 so far.
The pizza chain has been investing in its delivery business for the last few years by adding stores to existing markets to be closer to customers, making deliveries faster. Given the current public health environment, this could be advantageous. Even if one location temporarily closes due to the virus, customers will likely still be able to order delivery from another nearby location.
Domino’s, which has a market value of $12.3 billion, saw its shares surge by 25 percent on February 20, 2020, after the company’s Q4 earnings and same-store US sales beat Wall Street’s estimates.
This success, however, has come under threat due to the emergence of third party delivery aggregators such as Grubhub, DoorDash and Uber Eats that are presenting consumers with the ability to get food delivered from just about any restaurant. A concept that was once unique and provided a competitive edge to Domino’s has now been commoditized.
The chain’s stock could also start to feel the pinch as sporting events continue to be canceled. On March 13, 2020, shares were trading down about 4 percent before the market’s open. Last year, Domino’s offered half-off pizzas during March Madness, a promotion that helped the chain weather competition from third-party delivery providers. The annual NCAA basketball tournament has been canceled this year due to the pandemic.
Despite competitive pressures posed by COVID-19 and third-party aggregators, Domino’s is still in the best position relative to its peers to face the changing dynamics of the industry.