A Slice of Fortune Amid Economic Gloom
It looks like Pizza may be counter-cyclical. With the economy tanking, people are staying home watching TV and videos. So they order pizza. The result has been for the 13 weeks that ended 28 December, Domino's grew its same-store-sales by 8.6 per cent. While that is less than the 14.8 per cent growth for the same period last year, most other quick service restaurants would love such a rise in dough during the credit crunch.
John Beaumont, a U.K. leisure analyst at Singer, explains the phenomenon.
"Home comforts and home convenience has improved a lot so people are happier to sit at home, eat pizza and drink their cheap lagers from Sainsbury's, Tesco or whoever. It has been an amalgam of factors that have played to Domino's' strengths."
Its growing number of middle-class customers has been another key element of its growth over the past 12 months, as they feel the pinch and trade down away from eating at restaurants two or three times a week.
"There has been this whole trading down phenomenon in the past 12 months," says Mr Moore [Chief Executive of Domino's UK]. Domino's has seen a clear change in the type of customer coming on to its database. In simple terms, its new middle class customers started spending more than its typical brethren from the start, whereas typically this does not happen for a while until they get used to the menu.
"In the first six months of this year, there was a 19 per cent increase in new customers and a lot of these came from households that had less of a mortgage overhang and less debt problems," said Mr Moore.
There is a trend of a higher-end demographic that is "trading down" to pizza delivery, at least in the UK. Although those new customers are down scaling, they have a higher average ticket than the traditional Domino's Pizza customer. This may also be related to the e-commerce sales being up 73% over last year, since those are customers with home Internet and interactive TV--customers which are likely to have more discretionary income than households lacking home Internet access.
Chart graphics by Lionel via Google Finance
Also note that the popularity of the shows aired on a particular night correlates to an increase in pizza orders.
Domino's is also benefiting from a growing social phenomenon of people staying in at the weekend to watch popular reality TV series, particularly Strictly Come Dancing, The X-Factor and Britain's Got Talent. It seems that if twinkle-toes John Sergeant or the acerbic Simon Cowell are on the box, staying in is the new going out and pizza is on the menu.
Read the full story at The Independent, U.K.
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