How Much Change Do Domino's Delivery Drivers Carry

Recent events take leftDomino'south Pizza (NYSE:DPZ) struggling to deliver its pizzas to its customers. While the company has implemented short-term measures to endeavor to solve its biggest problem, here's why investors should exist concerned that the world'southward largest pizza chain won't be able to turn around its struggling stock anytime soon.

Commuter shortages and surging gas prices don't mix

Let's face information technology: Americans love their pizza, especially when it's delivered. No visitor knows that better than Domino's: Commitment makes upward two-thirds of its sales. However, the company tin can't detect enough delivery drivers and that was before gas prices recently spiked to historic highs. Direction blamed a tight labor market, rising wages, and the Omicron variant on its recent earnings call for the commuter shortage. Worse yet, direction stated commuter staffing "may remain a meaning claiming in the well-nigh term" and admitted it'southward impeding its "franchisees' power to accept and service all of the orders coming into our stores" on its about contempo earnings call.

A man delivers a pizza to a customer.

Prototype SOURCE: GETTY IMAGES.

Domino's commitment commuter shortage contributed to its full fourth-quarter revenue falling 1% twelvemonth over year. from $ane.35 billion in 2020 to $1.34 billion in 2021. Direction noted that its fiscal year 2020 contained a 53rd week, then revenues would accept risen six% yr over year when factoring in the actress week. Still, the lackluster revenue growth looks even more mediocre knowing the company increased its prices by about iii% year over twelvemonth. For comparison, its smaller competitor Papa Johns(NASDAQ:PZZA) increased its revenue by more than than 12%, from $469.8 million to $528.9 million, during the same fourth dimension period.

Domino's aims to ease its commuter shortages by incentivizing customers to choose carryout over commitment. The "carryout tips" promotion gives carryout customers who club online $3 toward their next social club. Notably, the deal runs through May 22, perhaps signaling that the company expects its delivery driver problem to continue until at least then.

The company won't plough to third-party commitment apps like DoorDash to UberEats to solve its biggest headache because direction vehemently opposes them. In fact, the company ran a "Surprise Frees" ad campaign in 2021 that gave abroad $50 million in gratuitous nutrient to its online-ordering customers as a way of highlighting the annoyance of surprise fees from tertiary-political party delivery apps.

Why Domino's delivery driver shortage might not matter

More than any other pizza chain, Domino'due south focuses on its digital ordering channels and loyalty rewards. In 2021, 75% of U.Due south. retail sales occurred via its digital channel, and its loyalty programme "Slice of the Pie" had 29 million agile users, and 70 million customers enrolled. Direction believes that its previous digital investments create an opportunity to bulldoze customers toward carryout. Across the same carryout tips program, the company plans on experimenting with lower prices of popular bill of fare items when the customer chooses carryout over commitment.

Whether or not those new initiatives will drastically change consumer habits is notwithstanding to be seen, but Domino'due south previously constitute success with its "Domino'southward Carside Commitment" program, which started during the height of the pandemic equally a contactless carryout pick. It after evolved to commitment to your car within two minutes of ordering online, and contributed to Q4 2021's ten% year-over-year growth in carryout aforementioned-store sales, according to management.

Can Domino's stock evangelize once more?

Domino'south stock is down about xxx% from its 52-week high in late Dec. 2021. The pizza chain's facing unprecedented challenges to its delivery services as the labor market tightens and gas prices accomplish historic highs. Meanwhile, the visitor is in the midst of transitioning leaders; current CEO Ritch Allison will retire on April xxx. Until Domino'southward tin can stabilize its delivery drivers or significantly modify customer behavior from delivery to carry out orders, expect its stock to stay cold and soggy.

This article represents the stance of the author, who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. We're motley! Questioning an investing thesis – even ane of our ain – helps us all recall critically about investing and brand decisions that help usa become smarter, happier, and richer.