Monday July 6, 2020, 00:00:00
By Mark Kalinowski
Is it possible the Street is underestimating sales and market-share opportunities in 2021 for the larger publicly-traded quick-service pizza concepts? We believe that Domino’s (DPZ; Buy, $374.09) and Papa John’s (PZZA; Buy, $83.66) both remain well-positioned for the future for multiple reasons, but this particular factor may be underappreciated. Incidentally, it’s possible for Pizza Hut (owned by Yum Brands [YUM; Neutral, $86.55]) to benefit from the same issue, although Pizza Hut will over the short-to-medium term likely have to deal with net unit closures, limiting to some meaningful degree its opportunity to take market share from other pizza outlets’ closures.
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Wednesday May 27, 2020, 00:00:00
By Mark Kalinowski
After yesterday’s (Tuesday’s) market close, Domino’s (DPZ; Buy, $360.16) provided a business update. Following our May 12th report in which we raised our Q2E samestore sales forecast to a sell-side high of +8.6% (it is still the high sell-side forecast as of 4 PM Eastern time yesterday, according to Consensus Metrix), Domino’s comments that its April 20-May 17 U.S. same-store sales rose by +20.9%, placing Q2-to-date (through May 17th) at +14.0%.
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Tuesday May 12, 2020, 00:00:00
By Mark Kalinowski
With this report, we upgrade our rating on the shares of Domino’s (DPZ) to Buy (from Neutral). Our upgrade is based on multiple factors, including: (1) we raise our Q2E U.S. same-store sales forecast by +190 basis points, to +8.6% — not only above sellside consensus (according to Consensus Metrix) of +6.8%, but also the new “highon-the-sell-side” forecast, (2) this summer’s new U.S. product launch could prove to be a hit, (3) while we are not modeling a meaningful international sales rebound, it could happen as more countries come back on line with their operations (for example, as of late April, only about 70% of Domino’s France stores were back open), (4) Domino’s company-owned stores (which represent about 2% of the worldwide store base, but which we calculate generate approximately 10%-11% of worldwide operating profits) should see their operating margins helped by lower cheese costs over Q2E-Q4E, and (5) while we are not predicting another massive shutdown of stores/lockdown orders/etc. for 6-12 months from now, if COVID-19 issues lead to such a circumstance several months from now — particularly over winter 2020-21; winters are relatively friendlier to respiratory viruses — Domino’s delivery & carryout focused business model should be more resistant than nearly all other business models in the restaurant industry.
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