Domino's sales lifted by online initiatives, improved menu

 
Feb. 28, 2012 | by Alicia Kelso

Domino's Pizza's profit was up nearly 28 percent for the fourth quarter 2011, versus the prior-year period.

These results were partly attributable to systemwide same-store sales growth and international unit growth.

Also benefiting the company's bottom line were its increased online presence, consumer engagement and improved menu offerings such as chicken, artisan pizzas and stuffed cheesy bread.

The new items have performed "very well" and have led to higher levels of customer retention and satisfaction, said CEO J. Patrick Doyle this morning in an earnings call.

"We've reached a new level of customer loyalty in the U.S. and strong brand equity around the world. These results came from international momentum, but also from technology," he added. "We expected continued growth and I'm happy to report a great year. We are not the same company we were even two years ago. We really are a different Domino's."

Doyle pointed to the company's successful digital initiatives, including its Cyber Monday promotion which yielded more than 1 million orders in a week, and its inaugural Domino's Global Day, which resulted in a record day in online sales.

The company estimates that it did more than $1.8 billion in online sales globally in 2011, averaging $34 million a week.

Domino's strategy also included a growth in mobile applications behind the launch of the iPhone app in June, and the Android application earlier this week.

"In six months, our total mobile business is just over 6 percent, and we expect the new Android app to drive sales even higher. The new app allows us to cover over 80 percent of smartphones," Doyle said.

In total, digital platforms account for about one-third of domestic sales. Globally, online sales in Japan account for about 50 percent of total orders, and in the UK, about 50 percent of delivery orders are done online.

"(Technology) is truly a way for us to offer one-on-one marketing with our consumers," Doyle said, adding that few competitors have such a large online presence.

Additionally, Domino's social media followers — through Facebook and Twitter specifically — grew 400 percent during the year.

The chain named Kevin Vasconi as its new chief information officer this week to help keep this momentum going.

International

Domino's 2011 and fourth-quarter story was about more than its technology advancements. The company's international division had record net store growth in fiscal 2011, with 413 new stores.

International same-store sales growth was up 4.7 percent in the fourth quarter, and 6.8 percent on the year.

"Our international store growth is very robust, and we've increased our long-range outlook. Domino's benefits from scale, and internationally, we are about 1.5 times bigger than our nearest competitor, but we still have significant growth opportunities," Doyle said.

He added that Domino's expansion in the next few years will largely occur in existing markets. In 2011, the chain added 54 net new stores in the United Kingdom; 58 in Turkey; and 75 in India, its fastest growing market.

Domestic

Doyle said Domino's has strong momentum from 2011 for all of its initiatives except for one: domestic store growth.

"We expected better, however spikes in commodity prices eroded store margins during the summer and made our franchisees more hesitant to expand," he said. "This is where the team is most focused — on cost saving and better efficiencies so our franchisees can generate more profits."

Still, domestic same-store sales grew 6.8 percent in Q4, and 3.5 percent for the full year.

Read more about operations management.


Alicia Kelso / Alicia has been a professional journalist for 15 years. Her work with FastCasual.com, QSRweb.com and PizzaMarketplace.com has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, Consumerist.com and Franchise Asia magazine.
View Alicia Kelso's profile on LinkedIn

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