Domino's Pizza (NYSE:DPZ) recently announced solid operating results in its fiscal third quarter. Yes, sales declined for the first time in years. But the pizza delivery leader's business isn't shrinking.
In this video from "Beat & Raise" from Motley Fool Live, recorded on Oct. 14, Fool contributors Parkev Tatevosian and Demitri Kalogeropoulos go over a portion of management's investor presentation that summarizes Domino's market share potential.
Demitri Kalogeropoulos: Moving down to the next highlighted slide here from management. This is a breakdown of just what management sees, why they like the category that they're competing in. They call it a strong growing and fragmented category. I'll just give you some highlights of what their training and this numbers not from the end of 2020. It's not going to change much in the last six months or so, but Domino's, of course is in the pizza industry, pizza fast food abbreviation on the side here, QSR and that's quick serve, just call that fast food. That's a good estimate there.
The global industry is around $85 billion is what they're estimating. As you can see there, a little bit more skewed toward international. But U.S. is a big part of that, obviously the single biggest. Domino's is accounting for around, I think 16 billion or so of systemwide sales is around that estimate so out of that 85. Definitely some room to grow. But what else great about this large, growing market that has an international and the U.S. component is that there is steady growth. We're talking fast food there is. When you think about the major fast group players, there's like the burgers and sandwiches division. That's where like McDonald's is dominant and there's Tex-Mex. But pizza I believe is right under that sandwich category. Just almost universal appeal.
Also, if pizza isn't really popular in a certain country, Domino's has a lot of flexibility in their menu to offer other things and there are some local menus that you wouldn't even recognize in other countries because they're so different but they cater to the local population. Then we're going to talk about this a little bit, too. But the fragmented aspect of the market is really attractive.
Obviously there are hundreds of restaurants that offer pizza. Maybe in any given metropolitan area there's national players, but there's a whole lot of mom-and-pop and small individual restaurants. That fragmentation it's good news for a big company, a dominant company like Domino's because it allows it to gain market share from those smaller places. Then also gain market share from maybe the No. 2 player if it can do that by consolidating it's got economies of scale that some of these smaller companies can't compete with. That's highlight I see on this slide. Do you have any takeaways on this one, Parkev?
Parkev Tatevosian: Yeah, Demitri, you covered this pretty well, but one thing I will add is the fragmented versus not fragmented is going to play a larger part because of the pandemic. As you can imagine, some of the smaller mom-and-pop type restaurants had a more difficult time enduring the difficulties of the pandemic so some of them may have closed. That certainly gave Domino's and opportunity to take some share from the smaller operators out there.
Kalogeropoulos: Yeah, great point.