By Granth Vanaik and Juveria Tabassum
(Reuters) -Domino’s Pizza shares surged 10% on Wednesday after the pizza chain said customers can start using Uber’s Uber Eats and Postmates apps for orders, as it tries to jolt its sluggish delivery business.
Domino’s said Uber Eats will be its exclusive third-party platform in the U.S. until at least 2024, as per its “global agreement” with the ride-share company.
The pizza maker, which had flagged a slowdown in the delivery business in April, said the partnership would begin in four pilot markets in the U.S. in the fall.
Ordering on Uber’s delivery apps is expected to be enabled across the country by the end of 2023, with Domino’s and its franchisees handling deliveries, the company said.
“Adding Domino’s to Uber’s U.S. marketplace will expand the pizza brand’s reach to new customers,” Northcoast Research analyst Jim Sanderson said.
The company has been raising the prices of menu items and increasing delivery charges as it looks to shield margins from high input costs after consumers turned to home-cooked meals during a sticky cost-of-living crisis.
In April, Domino’s said its delivery same-store sales declined 2.1% in the first quarter, compared to a year ago. It is set to report second-quarter earnings on July 24.
“The partnership will likely boost Domino’s struggling domestic delivery sales and improve franchisee economics,” said BTIG analyst Peter Saleh, adding that benefits would begin accruing only in the fourth quarter.
Domino’s said it will look to transition to making deliveries through Uber Eats in 27 international markets this year, including in the United Kingdom, Canada and Australia, which are common to the two companies.
The agreement would potentially allow Uber to take an incremental share over the next several quarters from the virtual duopoly it has with DoorDash in the U.S., said Angelo Zino of CFRA Research.
(Reporting by Granth Vanaik and Juveria Tabassum in Bengaluru; Editing by Janane Venkatraman and Pooja Desai)
