​Domino's Pizza's New Strategy Aims to Woo Customers Amidst Pricing Pressure

On Thursday, Domino's Pizza unveiled its strategy to rejuvenate demand in the U.S., spotlighting an enhanced loyalty program and tempting promotional offers. These moves are designed to counteract the diminishing allure of raised menu prices.

Michael Barera, CC BY-SA 4.0, via Wikimedia Commons

The global pizza behemoth's shares surged almost 4% in early trading, overturning earlier losses. This change of fortune came after the firm fell short of the anticipated third-quarter revenue due to a lukewarm delivery sector.

Recent hikes in delivery fees and multiple price increases have made some consumers think twice about placing an order. Recognising this, Domino's introduced enticing offers like a week-long 50% online discount and the innovative "Emergency Pizza" initiative to reignite interest.

September witnessed the revamp of Domino's loyalty scheme, aiming to reward frequent customers by offering a greater number of redeemable points. This move has led to a spike in the usage of the rewards program, as per the company's reports.

CEO Russell Weiner voiced his perspective during a post-earnings discussion, "Customers are essentially seeking value... Our goal is to highlight the essence of value beyond just the price tag."

The firm has provided insights about its forthcoming expectations, anticipating a surge in delivery orders. Meanwhile, they predict that the benefits derived from pricing will deplete more rapidly. In the imminent quarter, Domino's forecasts an average menu price increase just shy of 1%, a reduction from the previously predicted 2%.

In the context of a sluggish economic phase, Stephens analyst Joshua Long noted, "Consumers will naturally gravitate towards cost-effective dining options. Pizza epitomises value, positioning Domino's advantageously."

Hank Hession, CC BY 2.0, via Wikimedia Commons

However, the past quarter did throw a curveball at Domino's in the form of reduced supply chain earnings from its franchisees. The pricing to these stores dipped by 1.7% compared to last year's statistics.

On a brighter note, Domino's reported earnings per share stood at $4.18, surpassing the analysts' projection of $3.30 based on LSEG IBES data. Furthermore, the company enjoyed an uptick in operating margins by 190 basis points, primarily due to reduced expenses on commodities, notably cheese.