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Domino’s Pizza Sees U.S. Comparable Sales Boost, Suspends Outlook

support@smarteranalyst.com (Ben Mahaney)

Domino’s Pizza Inc. (DPZ) provided an outlook into the four weeks of its second quarter, projecting a 7.1% increase in U.S. comparable store sales, as demand for home-delivery services is on the rise during the coronavirus pandemic.

At the same time though, the world’s largest pizza chain by global retail sales pulled its two-to three-year outlook, citing the uncertainty about the global economy and the company's business operations as a result of the COVID-19 impact. Domino’s international same-store sales are expected to be down 3.2% in the four weeks from March 23 to April 19, according to preliminary figures.

"In a time of unprecedented change in our industry, I am pleased to report that Domino's is in a very strong financial position," said Ritch Allison, Domino's Chief Executive Officer. "We can't predict the full impact of COVID-19 on the broader economy and we don't know how consumer behavior and restaurant purchasing patterns may evolve coming out of this crisis. What I do know is that our franchisees and teams in the U.S. and across the globe will remain focused on safely serving our customers and our communities in this time of need.”

The company said that as of April 21, almost all of its U.S. stores remain open, while dining rooms remain closed and the stores are deploying contactless delivery and carryout services. Based on information reported by its master franchisees, Domino's estimated that as of April 21, there were about 1,750 international stores temporarily closed.

In the first quarter ended March 22, comparable sales for Domino’s U.S. stores advanced 1.6% year-on-year, which is below analysts’ estimates for a 1.89% increase.

Total revenue was up 4.4% to $873.1 million. Net income rose to $121.6 million, or $3.07 per share, from $92.65 million, or $2.20 per share.

As of March 22, Domino's had about $200.8 million of available cash and cash equivalents, $4.10 billion in total debt, and $158.6 million of available borrowings under its $200 million variable funding note facility.

On Friday, five-star analyst Christopher O’Cull at Stifel Nicolaus maintained his Hold rating on the stock but raised his price target to $350 from $335.

"Domino's strong domestic SRS gains to be sustained as the chain enhances the customer experience by further reducing any lingering safety concerns (e.g. 100% contactless delivery, Pizza Pedestal, drive-up carryout) and by introducing a new product platform this summer," said O’Cull. "We view the EPS volatility to be a short-term issue and expect many franchisees will return to building new units, a core ingredient to Domino's reliable cash flow growth, as they gain confidence operating in the new environment. We remain Hold rated but would consider being more constructive on a market-related pullback.”

Overall Wall Street analysts are divided between 14 Buys and 10 Holds adding up to a Moderate Buy consensus rating. The $382.43 average price target indicates 4.1% upside potential in the shares in the coming 12 months. (See Domino’s Pizza stock analysis on TipRanks).
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