Domino's is stuck in 2 wars

Wednesday, October 9, 2019 by Robinhood Snacks | Disclosures

Domino's is kinda ignoring delivery

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Hey Snackers,

Democracy is up for sale. The whole website: Minimum bid is $300K and the auction to own ends on 10/25.

The Dow dropped a hefty 150 points Tuesday because investors aren't feeling optimistic about this week's critical US/China trade negotiations.

1. Domino's jumps 5% thanks to its secret weapon: carryout (don't call it takeout)

Toss some mozzarella on the wounds... Domino's shares ended the day up 5%, but it's stuck in the middle of 2 wars right now: #1 is the "The Pizza Wars." They caused the carb-packed chain's quarterly sales to slow to just 2.4% growth. Here's how the competition and their stocks are doing this year:

  • YUM Brands — up 24%: The owner of Pizza Hut has the deal with the NFL to cover your Sundays in pepperoni.
  • Papa John’s — up 35%: There's a new CEO, and investor Shaq is even opening up his own-branded Papa locations (size 22 shoe-prints included).
  • Domino’s — down 1%.

#2 is The Delivery Wars... Domino's is stuck in them too. Postmates, DoorDash, GrubHub, and Uber Eats are delivering pizza — and gyros. And quinoa salads. And late-night grilled cheese. The optionality of 3rd party delivery apps are snagging loyalty from hangry 20-somethings. The Domino's faithful like to mix up dinner every now and then.


Search for your profit puppy... Domino's profit-driving revenue source is “carryout.” That's the same thing as takeout or pickup, but Domino's CEO dropped the term 17 times on the earnings call. Carryout makes up 45% of Dom's sales and is more profitable than delivery because they don't have to pay a delivery driver. The CEO's plan for more carryout is why investors bought up Domino's shares Tuesday.


The tweet heard 'round the C-suite... Heading into the weekend, the Houston Rockets basketball team's GM tweeted support for Hong Kong's pro-democracy protestors resisting political influence from China's Communist Party. Hong Kong is part of China, but a different political system. It's a sensitive subject for Beijing, so China responded hard (and here's mainland China's perspective as told by the Brooklyn Nets' owner).

  • Houston Rockets merch was yanked from Alibaba, the huge Chinese ecommerce platform.
  • Two NBA pre-season games this week won't be aired on TV in China as planned.
  • FYI: The NBA is bummed to make China's naughty list — last year 490M Chinese watched NBA games, and they love the Rockets in particular because of Yao Ming.

American execs have a history of sucking up to China's government... to gain access to its 1.4B potential Starbucks-sipping customers. US CEOs tolerated trade rule-breaking and turned their heads to human rights abuses. Zuck even learned Mandarin to try to get Facebook un-banned in China (he failed).


China effectively censors American business speech... It's famous for its Great Firewall, which tightly controls online information throughout the country (ironically, the Chinese people couldn't be offended by the tweet because Twitter is banned in China). And cameras are everywhere (all 200M of them installed by China's government). But American businesses are increasingly careful to say things critical of China in fear of economic punishment. Even if it's less than 280 characters.


Message to J&J's lawyers: Don't expect a bonus... A jury just told America's biggest medical and home goods company to pay 1 man $8B. It's compensation for damages related to a Johnson & Johnson drug he took as a boy that was supposed to treat psychoactive issues, but also enlarged his breasts. J&J is calling the payout "excessive" and is appealing.

Law & Order gets 0 stars at J&J... The drug in question is Risperdal, which was one of J&J's profit puppies before its patent expired. It's not the only J&J creation that used to make profits but now makes lawsuits:

  • Baby Powder: A jury determined J&J should pay 22 women $4.7B last year for its baby powder — the verdict was it caused the cancer.
  • Opioids: A judge ordered J&J to pay $572M last spring for its role in the opioid crisis — and that's just in Oklahoma.

Company culture tip: Welcome the bad news... Don't hide it. In many of these companies-getting-sued stories, there's an element of companies' awareness of their products' harmful impacts on society, then burying the info skin-deep to preserve profits. Instead, management can encourage whistle-blowers — that could prevent future lawsuits (the plaintiffs' lawyers end up discovering the smoking pills anyway).

What else we’re Snackin’
  • Rocket-fuel: Boeing's venture capital arm invests $20M into Virgin Galactic to get in on space tourism
  • Resurrected: Toys 'R' Us is bringing back its website — and Target is going to help run the thing before the holidays hit
  • Rivals: Facebook's Workplace (its Slack-competitor) just hit 3M paying customers
  • Rebound: Rent The Runway is back to accepting new customers after an 11-day software mess-up halted the clothing rental pioneer
  • Off: PG&E is California's main utility company, but it's shutting off power to 800K residents as a forest fire safety move
  • Dessert: Costco now sells 76-ounce tubs of cookie dough that last for up to 2 months. Just sayin'.
Snacks Daily Podcast

Unicorn of the Day: The $1.5B One Medical is hiring bankers for an IPO while it techifies your annual physical

  • Details (aka "minutes") from the Fed's last policy meeting

Disclosure: Authors of this Snacks own shares of Alibaba

ID: 976146

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