Domino's Pizza (DPZ -1.68%) stock rallied through most of the pandemic in 2020 but has come back down in recent weeks. Its last earnings report showed that the company is struggling to expand in a few international segments even as its core U.S. market is getting more competitive.
Still, the fast-food delivery leader is almost sure to announce its 39th straight quarter of growth in the U.S. in just a few days while laying out its hopes for winning more market share in 2021.
Let's look at a few metrics that will impact the stock when Domino's announces fourth-quarter results on Thursday, Feb. 25.
Image source: Getty Images.
Sales hits and misses
Domino's last sales result marked a record growth rate in the U.S., but investors still found some reasons to worry about sales trends. Rival Papa John's International (PZZA 1.87%) grew much faster in the third quarter, for one. Rising competition is a key reason why Domino's has been working to boost customer satisfaction by reducing delivery times.
"Our category remains fragmented and customers often switch brands," CEO Ritch Allison said in early October. Papa John's will announce its results on Thursday, too, so we'll find out if Domino's was able to slow its recent market share surge.
The chain is also struggling in some key international markets, making management question whether it will be able to reach its long-term goal of having 25,000 global locations running by 2025. Look for an update on that store expansion forecast this week.
The pricing game
Domino's resisted cutting prices in Q3 even as delivery peers ramped up their promotions. That move helped the chain stand out from rivals by keeping operating margins rising.
DPZ Operating Margin (TTM) data by YCharts
The chain might have gotten more help on this score in late 2020 thanks to popular limited-time releases and an upgraded chicken wing offering. If Domino's can still post strong growth without slashing prices, then it will be free to use targeted promotions on its own timetable. Slower growth and falling margins, meanwhile, would imply tougher selling conditions for the market leader and the wider niche in 2021.
Looking ahead
Domino's doesn't issue short-term growth outlooks, and that habit should hold this week given all the questions about the timing of the pandemic's end. But management has hinted at significant strategic changes brewing that might shift the company's focus over the next few years. Store expansion could take a back seat to boosting efficiency internationally while Domino's works to fortify its massive pizza delivery business at home.
The good news is that the chain is entering this period with plenty of financial resources it can direct toward fighting off rivals. The big question is whether those assets will be enough to protect all the market share Domino's has gained in the last decade.
That metric hit 35% in the U.S. last year compared to 25% five years earlier. We'll find out soon if some of those latest gains are about to swing back to competitors inside and outside of the pizza delivery niche.
