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Domino's to Launch In-Vehicle Ordering App, Boosts Delivery

Zacks Equity Research

Domino's Pizza, Inc. DPZ has announced that it is working with a leading in-vehicle service provider, Xevo Inc., to introduce a pizza ordering app, pre-loaded in cars. This in-vehicle Domino’s app, to be launched in 2019, will be powered by Xevo Market. The Domino's ordering feature will be automatically loaded on millions of cars with the Xevo platform, starting from late 2019.

On installation of the app in automobiles, customers will be able to order food from the car. Consumers can also locate their local store and call in an order from the in-car interface.

This move is in line with Domino’s consistent effort to improve technological capabilities and reach out to a greater number of customers. The company has been trying to augment technological capabilities in a cost-effective way.

As it is, high costs have been weighing on Domino’s margins for some time, which in turn affected earnings. Notably, shares of the company have gained 4.8% over the past year, underperforming the industry’s 18.9% rally.

 

Focus on Digital Offerings

Domino’s continues to bolster sales through various remodeling initiatives. The company is also investing heavily in technology-driven initiatives like digital ordering to boost sales. In 2017, its AnyWare suite of ordering platforms, which allow customers to order from various ordering apps and platforms such as Google Home, Facebook Messenger, Apple Watch, Amazon Echo, Twitter and via a Pizza emoji on text, grew significantly.

Meanwhile, the company’s digital loyalty program — Piece of the Pie Rewards — continues to contribute significantly to traffic gains. The extended ways to order a pizza thus kept Domino’s at the forefront of digital ordering and customer convenience. On the delivery front, Domino's, in conjunction with Ford Motor F, initiated research on consumers’ responses to pizza delivery, using self-driving vehicles.

Notably, digital leadership is helping the company expand the brand in the domestic market as well as overseas. In 2017, Domino’s invested $90.3 million in its proprietary point-of-sale system — Domino’s PULSE, digital ordering platform, supply chain centers, new company-owned stores, reimaging existing company-owned stores’ internal enterprise systems and other technology initiatives.

Our Take

We believe that the introduction of in-vehicle ordering platform will help Domino’s reach out to more customers and drive comparable sales. In the fourth quarter, the company’s global retail sales (including total sales of franchise and company-owned units) were up 6.5% year over year. This compared unfavorably with 11.7% growth in the year-ago quarter. This uptick can be attributed to solid comps at international stores (up 3.3%) and domestic stores (up 10.2%).

Excluding foreign currency impact, global retail sales increased 9.5%. Notably, the fourth quarter marked the 31st consecutive quarter of positive U.S. comparable sales and the 100th consecutive quarter of positive international comps.

We also think that this move will lend Domino’s a competitive advantage over its peers like Yum! Brands YUM and Pizza Hut PZZA.

Domino’s currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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