Brief Overview of the pizza segment in US QSR industry.
Revenue Model of Domino’s Pizza
Domino’s Pizza leads the Pizza segment in the US QSR industry. In 2018, the US QSR industry was estimated to be worth 299.6 Billion US dollars. The pizza segment itself is estimated to be worth 36.5 Billion US dollars in 2018. The US QSR industry is large and fragmented. Pizza segment was worth 32.8 Billion US dollars in 2008. Its size grew to 36.5 BIllion US dollars in 2018. It is the second largest segment in the entire QSR industry. In US, the Pizza segment is comprised mainly of delivery, dine in and carry out services. Domino’s competes with other brands in the delivery and carry out segments. Apart from being the market leader in the delivery segment, Domino’s Pizza is also among the largest three chains in the carry out segment.
In 2018, the entire delivery segment had net sales of around $9.8 Bilion US dollars which was around 27% of the entire US QSR pizza segment. However, it was still lower compared to the level of sales in 2008 when the US QSR pizza segment had net sales of 10.3 Billion US dollars. From then net sales in the US QSR pizza segment fell to 9.7 Billion US dollars in 2012 and rose again to 9.8 Billion US dollars in 2018. In the US QSR pizza category, the three leading brands including Domino’s pizza account for close to 56% of the net sales. Regional Pizza brands and indpendent chains account for the rest of the Pizza sales. The carry out segment on the contrary has seen faster growth having grown from 14.1 Billion dollars to 17.1 Billion dollars from 2008 to 2018. The international pizza delivery segment is not as developed as the US pizza segment. The demand for Pizza is growing around the world. However, the emphasis on customer experience and consumer convenience have also grown in the meantime.
Domino’s Business and competition:
Based on the level of retail sales globally, Domino’s is the world’s largest pizza company. Founded in 1980, Domino’s has grown into a leading international pizza brand with more than 15,900 locations in more than 85 countries in the world. Globally, the entire Domino’s system (including franchised and company owned restaurants) sells more than 3 million pizzas daily. Pizza is the second largest category in the US QSR industry. In 2018, Domino’s had 5,486 franchise stores in US operated by 793 independent franchisees. The number of international franchise stores in the same period was 10,038. The total number of Domino’s stores throughout the gobe had grown to 15,914. The company expects the total number of stores in the Domino’s system around the world to have grown above 25,000 by the year 2025. Over the past five years, the company has added more than 5000 stores globally.
Among the primary competitors of Domino’s are Pizza Hut, Papa John’s and Little Caeasar’s Pizza in the US market. In the internatinal market, apart from Pizza Hut and Papa John’s, there are other national and local Pizza brands that compete with Domino’s Pizza. The largest franchisee of Domino’s based on the number of retail units in 2018 was ‘Domino’s Pizza Enterprises’ which alone operated 2,383 stores in 7 internationa markets. Domino’s menu basically includes pizza products in varying sizes and crust types. Toppings vary from market to market and culture to culture. The company also adds specialty items based upon local taste in specific markets.
Sources of Revenue:
The main source of revenue for Domino’s is its supply chain which accounts for the highest part of its entire revenue. Apart from that, the royalty and fees received from its franchisees are the second largest source of income for the brand. Domino’s also operates a limited number of stores in the US market. Supply chain of Domino’s caters to certain Domino’s franchisees and company operated stores in US and Canada. In 2018, the sppply chain segment of Domino’s accounted for around 57% of its revenue. It generated nearly 1.94 Billion US dollars in revenue. Rest of the sources including royalties and fees from the US and international franchisees as well as sales in the company operated stores generated nearly 1.5 Billion US dollars in revenues. Domino’s supply chain operates 19 regional dough manufacturing and food supply chain centers in US and 5 dough manufacturing and food supply chain centers in Canada.
Performance in 2018:
In 2018, franchised and corporate stores of Domino’s generated $13.5 billion in global retail sales. Retail sales in US were around 6.5 Billion dollars and approximately 7 Billion dollars internationally. Its domestic and international retail sales each grew by around 600 millions in 2018 over the previous year. In just past five years, global retail sales of the company have grown by around $5.5 billions.
Company owned stores in US achieved a sales of 514.8 million in 2018 compared to 494.8 millions in 2017. Royalties and fees from the US franchisees reached 391.5 millions compared to 351.4 millions last year. Revenues earned from the royalties and fees received from the international franchisees were 224.7 millions in 2018 compared to 206.7 million last year. Total revenues of the brand reached 3,432.9 millions in 2018 as compared to 2,788 millions last year.
Conclusion:
Domino’s is a leading Pizza brand with strong international presence. Its revenue has also risen sharply in the last five years. By 2025, the company expects systemwide number of restaurants to have grown above 25,000 stores. The main focus of the company is upon quality and customer convenience. This has led to strong brand equity in the US and international markets apart from high sales, customer loyalty and overall popularity. Demand for Pizza around the world is growing and it presents an attractive opportunity for Domino’s.
Alphabet (NASDAQ: GOOG, GOOGL) is experiencing a sharp rise in its non-advertising revenue. Its business is divided into two reportable segments that include Google & Other Bets.
Alphabet’s main source of revenue from the Google segment is advertising which accounted for more than 85% of the company’s entire revenue in 2018. In 2019, the share of advertising revenue has decline to less than 85% of the company’s net revenue. The share of non-advertising revenue in the net revenue of google has kept rising over the past three years. Total nonadvertising revenue of google has grown by more than 90% from 2016 to 2018. According to 2018 form 10K of Alphabet, non-advertising revenue in 2016 stood at $10.6 billion which grew to $19.9 billion in 2018. The fourth quarter non-advertising revenue of Alphabet in 2018 reached $6.5 billion compared to $4.97 billion in 2017 Q4.
Here is how much Google generated from non-advertising businesses during past four years:
Year
NonAdvertising Revenue ($mn)
2016
$10,601
2017
$14,970
2018
$19,901
2019
$25,932
The sources of non-advertising revenues of Google include sales of apps, in-app purchases, digital content products, and hardware; and licensing and service fees, including subscription fees for Google Cloud offerings.
In fiscal 2019 as well, Google’s non-advertising revenue has grown sharply. Check the table below. (Sums are in millions)
2019.
Q1
$5,449
Q2
$6,181
Q3
$6,428
Q4
$7,878
As you can see, Google’s non-advertising revenue has gained significantly compared to the previous year in 2019. The total revenue of Google during fiscal 2019 at the end of the third quarter was $18,058 million compared to $13,419 million during the same period the previous year. The net revenue of Google during the fourth quarter of 2019 grew to $45.8 billion compared to $39 billion in 2018.
About Google:
Google is the leading search engine in the world with the largest market share. Its core source of revenue is digital advertising where it leads the industry. The parent company of Google is Alphabet which also operates other businesses (collectively termed as other bets) apart from Google. Google is the largest business segment of Alphabet which has enjoyed revenue growth from the cloud as well as YouTube ads in recent years. The company has its headquarters in Mountain View, California, United States. The CEO of Alphabet is Sundar Pichai. Google was founded on 4th September 1998 at Menlo Park, California, United States. The head office of Google at Mountainview, California, is known as Googleplex.
Sam’s club is the premium business segment of walmart which was started in the year 1983. It includes membership-only warehouse clubs and is operational in 44 states in the U.S. and in Puerto Rico. Sam’s club also operates through eCommerce channels. In fiscal year 2018, Sam’s club accounted for around 12% of the net sales of Walmart. In 2019, its net sales declined by 2.3% as compared to the previous year falling to around 57.84 Billion dollars.
(Sources: Walmart Annual reports)
Walmart was incorporated in Delaware in 1969. the company started its international operations in 1991 and first ecommerce initiative in 2000. The company has expanded internationally and operates across 27 countries as of 2018. each week around 270 milion customers visit its more than 11,700 stores. the company also serves its customers in 28 countries through ecommerce websites under 65 banners. the number of total retail units ofWalmart in 2018 reached 11,718. Walmart US segment had 4,761 units whereas Walmart Internation 6,360 and Sam’s club had 597.
Walmart operates retail, wholesale and other units in the U.S., Africa, Argentina, Brazil, Canada, Central America, Chile, China, India, Japan, Mexico, and the United Kingdom. It conducts its business in three reportable segments that are Walmart U.S., Walmart International, and Sam’s Club. The largest of these segments that accounted for around 64% of the total revenue of the brand is Walmart US with operations in all 50 states in the U.S., Washington D.C., and Puerto Rico. Walmart International has operations in 27 countries outside the USA. Sam’s club is a chain of membership-only warehouse clubs. (Walmart Annual Reports).
Nike (NASDAQ: NKE) is a well known sports shoe and apparel brand based in the United States. The company has its headquarters in Oregon, United States. It sells its products worldwide through both online and offline channels. Apart from the company owned retail stores, Nike also sells its products through independent distributors as well as licensees and sales repersentatives in almost all the countries around the world. United States is the largest market for Nike products. However, its share of revenue from the international markets has continued to grow over the last few years. The company has 384 brand retail stores operational in United States as of 2019 apart from 768 operational internationally.
2019
2018
Revenue
$39,117
$36,397
Net Income
$4,029
$1,933
Gross Profit
$17,474
$15,956
Total Assets
$23,717
$22,536
Cost of sales
$21,643
$20,441
Marketing expenses
$3,753
$3,577
Selling and administrative expenses
$12,702
$11,511
Nike Distribution Centers in the United States:
The company has established six main distribution centers in the United States. Four of these distriution centers are located in Memphis, Tennessee. Nike owns two of these distribution centers and the rest two are leased properties. One more distribution center of Nike is located in Indianapolis, Indiana and one another in Dayton, Tennessee. Apart from the six main distribution centers, Nike also ships apparel and equipment form one another distribution center that is located at Foothill Ranch, California. This one is a leased facility and there are several more smaller distribution centers of Nike, all of which are leased and operated by third parties and located throughout the US in the various corners of the country.
Nike Brand Financial Performance in fiscal 2019 versus 2018
Apart from Nike brand products, the company also sells Hurley, Jordan and Converse products. (However, here we are discussing Nike’s sales and revenue from Nike brand products only) Nike’s net revenue grew by 11% on a currency neutral basis in 2019 compared ot the previous year. It experienced revenue growth across all the geographic markets. Nike brand revenue from footwear and apparel grew 12% and 11% respectively in 2019. Revenue from Nike brand equipment on the other hand grew by 4%. Nike brand revenue grew aross all footwear categories. While the sportswear category saw the highest growth in revenue of all the footwear categories, the Jordan Brand and running categories also experienced growth though less than the sportswear category. While the unit sales of footwear grew by 8%, higher average selling price per pair drove a growth of around 4% in Nike’s revenue from footwear. Footwear accounted for around 65% of the company’s net revenue in 2019.
Nike revenue from Nike brand apparel grew 8% and 11% on a currency neutral basis. The company experienced revenue growth across all the NIke brand apparel categories. Nike experienced a 6% growth in the sales of Nike brand apparel. Due to higher average selling price per unit, the revenue of the brand from apparel sales grew by around 5%.
Nike revenue from Direct sales grew to 32% of the total sales of the brand compared to 30% during the previous year. Ecommerce sales in 2019 reached $3.8 billion compared to $2.8 billion in 2018. Several factors drove the growth in revenue from Nike Direct which grew 16% on a currency neutral basis. Ecommerce sales of NIke grew 35% driving much of the growth in revenue from Nike Direct. Apart from that growth in comparable store sales as well as growth in the number of stores also drove revenue growth across Nike Direct.
Nike’s revenue from men’s and women’s products grew 10% and 11% respectively on a currency neutral basis in 2019 compared to the previous year. Nike exprienced grwth across nearly all product categories for men and women and the highest across the sportswear category. Several factors drove Nike’s revenue growth across women’s product categories including Nike’s focus on creating more compellign designs, creating marketing camapigns focused on the female audiences worldwide as well as a shift towards a digital distribution strategy led by digital channels. Nike also exprienced growth across its Kids product categories except football products for kids. Wholesale revenue was 68% of Nike’s consolidated net revenue whereas revenue from Nike Direct was 32% on a currency neutral basis.
The geographic region accounting for the highest part of the company’s net revenue is North America. In 2019, it accounted for 43% of the company’s revenue, followed by Europe, Middle East and Africa at 26% as well as Asia Pacific and Latin America at 14%. Greater China accounted for 17% of the net revenue of the brand in 2019.
North America revenue of Nike grew 7% in 2019 compared to the previous year. 2019 revenue of Nike from North American region was $15.9 billion compared to $14.9 billion in 2018. Revenue from Europe, Middle East and Africa grew to $9.8 billion in 2019 compared to $9.2 billion in 2018. Revenue of Nike from Greater China reached $6.2 billion in 2019 from $5.1 billion in 2018.
Nike is a leading international brand of sports shoes, apparel and equipment. Check out the wholesale equivalent revenue of Nike from sportswear from the following table. In 2019, Nike earned $12.4 billion in revenue from sportswear as compared to $10.7 billion in 2018.
Nike is a leading international brand of sports shoe, apparel and equipment. Check out its ROA (Return on Assets) from 2005 to 2019 from this table. In 2019, Nike’s Return on Assets (ROA) was 17.4% in 2019 compared to 8.4% in 2018.
Nike is a leading international brand of sports shoes, apparel and equipment. Check out its Return on Equity (ROE) from the table below. In 2019, the return on equity of Nike inc was 42.7% compared to 17.4% in 2018.
Nike is a leading brand of sports shoes, apparel and equipment. The company has an international presence. Read about its Price/Earnings (P/E) ratio from 2005 to 2019 in the table below. Nike’s P/E ratio was 31 in 2019 compared to 61.4 in 2018.