It’s safe to say that the food delivery space is getting a lot more competitive.
- McDonald’s (MCD) has partnered with UberEats.
- Amazon (AMZN) has entered the space.
- Meanwhile, upstarts like DoorDash and Postmates are attracting serious venture capital funding.
None of this is good news for Domino’s (DPZ). Especially if its biggest rival, Pizza Hut, can get its act together.
“When you look at the $1 billion-plus in pizza chain market share shift in the past few years, Pizza Hut has basically ceded all of the market share to Domino’s and Little Caesar’s,” says Hedgeye Restaurants analyst Howard Penney in the video above from his recent short Domino’s institutional research call.
Don’t expect this to continue.
“This historical context is important to keep in mind if you’re long Domino’s and you think it’s going to continue with 10 or 11% comps,” Penney says. “Implied in that statement is they’re going to gain more market share.”
But beware. Domino’s has hit a snag in the international portion of its business, as Domino’s Pizza Group (DOM-GB) and Domino’s Pizza Enterprises (DMP-AU) have all seen same store sales slow dramatically. DMP-AU was the first domino to fall, as they reported disappointing FY17 financials, missing upgraded guidance figures.
And while Pizza Hut is struggling, it’s the “800 pound gorilla” in the room and owned by a very motivated parent company, Yum! Brands (YUM), Penney says. “Yum is a really well run company and they’ll get it right. They certainly have a plan that works for KFC and they’re going to take that and implement it for Pizza Hut,” he says.