During Domino's Pizza's (NYSE:DPZ) recent second quarter conference call, CEO Patrick Doyle stated, "Our dependable franchise model, robust global business, and leading digital strategy worked together to drive great consistent results." Digital includes orders from desktops, laptops, cell phones, and tablets are having a game-changing effect on the industry.
The Domino's domination
Domino's Pizza reported its fiscal second quarter results on July 22, and the company's dominating results continued. Total revenue, domestic same-store sales, international same-store sales, and earnings per share all soared 8.8%, 7.7%, 11.7%, and 17.5% respectively.
Contributing to this success in no small part is the widespread increase in digital ordering by customers of the pizza industry. CEO Patrick Doyle explained in a recent interview the ability for people to order from their computers, phones, and tablets is driving growth.
Doyle continued, "The smaller and regional players have clearly been losing [market] share to the bigger national players. That's been a big trend over the course of the last two to three years." He believes this is mostly due to digital ordering that is either unavailable or of inferior capability from the smaller players.
"Amongst the national chains we've been growing very nicely over the last few years, more than anyone else. Papa John's (NASDAQ:PZZA) has had a couple of good quarters; Pizza Hut has had a little bumpier last few quarters, but Yum! [Brands] (NYSE:YUM) is a great organization. They'll figure it out I'm sure they'll get back on track. But really the big trend is the larger players taking [market] share from the small players."
The pizza race
Both Papa John's and Domino's Pizza has their sights set on over 50% of their sales coming from digital orders. Domino's Pizza is currently at 45% and climbing. Mobile ordering in particular is driving much of that growth. The company has around half of its orders now come from mobile devices.
During the earnings conference call, Doyle stated,
"Every part of the digital mix has been growing but mobile has been growing clearly much faster than laptops and desktops. But we're still continuing to see growth on the computers as well which is interesting. It hasn't been about cannibalization, it's really been about just faster growth is coming from mobile than from computers."
The power of mobile
That is quite interesting there isn't so much a case of mobile ordering only coming from ex-desktop-ordering customers but rather from apparently brand new customers. You can count me in that second group by the way.
It seems like when it comes to digital pizza ordering people tend to be a creature of habit and stick with it. That's great news for Domino's Pizza and maybe not so much for its competitors. People may want to experiment "just once" ordering digitally then get hooked. I confess that I'm one of those - it's kind of fun.
And I'm clearly not alone. Domino's launched a new Domino's iPad app back in May. The company reported after the first four weeks it logged over $1 million in orders. It sounds like a drop in the bucket for the multibillion dollar company, but apparently it was a significant enough start for Domino's to report.
"I guess what I'd say is what continues to be true is the economics of digital orders are better for us than phone orders and walk-in orders and it continues to be better experience for our customers. Their loyalty is better, their customer satisfaction is higher."
Look for Domino's domination to continue thanks to digital ordering. As long as same-store sales and overall revenue continues its trend, earnings too will continue to escalate and Domino's Pizza will remain a winner.
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