Recent Posts

DPZ (Post-Call): Refranchising and Better-than-Expected U.S. Comps a Tasty Combo

Earlier today, Domino’s reported Q3 EPS of $2.79, below our $3.05 forecast and sell-side consensus (according to Consensus Metrix) of $2.97. The Q3 tax rate was 23.8%, more onerous than our 19.5% estimate and consensus of 19.6%. We calculate that the difference between the Q3 actual tax rate and consensus cost Domino’s about -15 cents in Q3 EPS (in other words, excluding this tax-rate difference, Q3 EPS came in only -2 cents below consensus).

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12:19 PM

DPZ: Changes to National Offers Coming in Mid-October

Back in mid-March 2022, Domino’s raised the price of its popular Delivery Mix & Match Deal to $6.99 (from $5.99). For both the Delivery Mix & Match Deal and the Carryout Mix & Match Deal, customers select two or more menu items from a set list. CNN noted back on March 1st that “Domino’s also is expanding the items available in the deal, including the addition of 32-piece parmesan bread bites, 6-piece wings and 3-piece chocolate lava cakes. Some of the other options currently on the menu are medium 2-topping pizza, bread twists, salads and marbled cookie brownies.”

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12:27 PM

DPZ (Post-Call): Q2 U.S. Same-Store Sales Better than Feared

Earlier today, Domino’s reported Q2 EPS of $2.82, short of our $3.00 forecast and sell-side consensus (according to Consensus Metrix) of $2.90. However, the Q2 tax rate of 23.2% was more onerous than our 19.0% projection and consensus of 19.2%. If the tax rate had been equal to consensus, by our calculations Q2 EPS would have been +16 cents higher – placing it +8 cents above consensus, and only -2 cents below our forecast.

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12:14 PM

DPZ: What Could Higher Delivery Mix & Match Price Mean for Earnings?

Domino’s recently announced that it would increase the price of its Delivery Mix & Match offer in the U.S. to $6.99 ($6.99 each for delivery of two or more menu items selected from the Mix & Match menu). We believe that by the end of March, this menu-price increase was substantially complete. What could it mean for Domino’s earnings?

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7:00 AM

DPZ: Domino’s Updates its U.S. Technology Transaction Fee

In some years, Domino’s U.S. updates its Technology Transaction Fee. This is the amount Domino’s domestic franchisees are charged for each digital transaction, and in 2021 it was raised to $0.275 per digital order. This was up from $0.260 per digital order in 2020 (a year-to-year increase of +1.5 cents per digital order). We estimate that this increase added about +12 cents to Domino’s 2021 EPS, which in total ending up amounting to $13.60.

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12:49 PM

DPZ (Post-Call): Stock Showing Resilience in Face of Fundamental Challenges

Earlier today, Domino’s reported its Q4 earnings, and also announced a CEO transition.  Regarding the fourth quarter, EPS reached $4.25, close to our $4.24 estimate and sell-side consensus (according to Consensus Metrix) of $4.28. But importantly, this includes the benefit of “a $34.3 million pre-tax unrealized gain on the Company’s investment in DPC Dash Ltd…. the Company’s master franchisee” for Domino’s China. On today’s call, the company indicated that this change accounted for +68 cents of Q4 EPS.

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12:11 PM

DPZ (Post-Call): Stock Shrugs Off U.S. Same-Store Sales Miss

Earlier today, Domino’s reported that its Q3 U.S. same-store sales declined by -1.9%. This was lapping a +17.5% figure from Q3 2020 — the best quarterly performance in this regard in over 20 years — but nevertheless the -1.9% was still a disappointment. It fell short of our +2.0% forecast and sell-side consensus (according to Consensus Metrix) of +1.6%. The -1.9% showing is the first negative same-store sales quarter for Domino’s U.S. since Q1 2011’s -1.4% (which lapped a +14.3% from Q1 2010).

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11:25 AM

DPZ: Updating Our Same-Store Sales and EPS Projections

With this report, we boost our Q2E same-store sales forecasts as follows: (1) for Domino’s U.S., up by +120 basis points, to -1.0% (according to Consensus Metrix, sell-side consensus is at -1.8% as of this writing), and (2) for Domino’s International, up by +200 basis points, to +12.0% (sell-side consensus is at +10.0% as of this writing).

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4:26 PM

DPZ: Updating our EPS and Same-Store Sales Forecasts

With this report, we increase our Q1E U.S. same-store sales forecast for Domino’s by +260 basis points, to +10.5%. As of this writing, sell-side consensus (according to Consensus Metrix) is at +9.4%. Our increased forecast represents factors including: (1) quick-service delivery specialists still seem to be more appreciated by consumers in general, (2) stimulus-related consumer spending in January and in March, and (3) the return of the March Madness college basketball tournament — generating TV ratings on par with 2019 levels, unlike many other major sports games/events — seems to be driving demand for pizza delivery.

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4:06 PM

DPZ (Post-Call): Tougher Year-on-Year Comparisons Getting Closer

Earlier today, Domino’s reported Q4 EPS of $3.85, above our $3.50 projection, but a little short of sell-side consensus of $3.88 (according to Consensus Metrix). The $3.85 figure includes a +39 cent boost from 2020’s extra, 53rd accounting week. The next 53-week fiscal year for Domino’s will be 2026.

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5:53 PM

Updating our Q4E Kalinowski Quick-Service Pizza Same-Store Sales Index

With this report, we update our data-driven Kalinowski Quick-Service Pizza Index for Q4E to +12.1%. This figure is based on our latest proprietary checks/data as regards same-store sales performance for this segment during October, November, and December. We believe that December same-store sales were likely the best month of the quarter, while October was helped by arguably the busiest Halloween ever for pizza delivery/carryout.

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12:00 AM

Look to Popeyes to Learn about Domino’s and Papa John’s

Both Domino’s (DPZ; Buy, $392.57) and Papa John’s (PZZA; Buy, $80.36) begin lapping very difficult year-over-year domestic same-store sales comparisons in Q2 2021. What can we learn about the recent history of restaurant concepts that have lapped difficult comparisons, in this regard? And, what might Popeyes Louisiana Kitchen (owned by Restaurant Brands International [QSR; Not Rated]) teach us about what to expect for Domino’s and Papa John’s domestic same-store sales in 2021? Our bottom line is that Domino’s and Papa John’s could end up lapping these tough numbers better than the Street currently anticipates.

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12:00 AM

Large Restaurant Concepts Closing a Lot Less Units than Independent

Looking at unit closures announced and planned by large restaurant chains, and comparing these to unit closures from mom-and-pops/independents, goes to show just how large a market-share shift is going on in the U.S. restaurant industry. We look for most, if not all, of this market-share shift in favor of large concepts to persist in the years after 2020.

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12:00 AM

DPZ Adjusting Our Q3E Estimates Ahead of 10.8 Earnings Release

Domino’s (DPZ; Buy, $423.46) plans to report its third-quarter earnings before the market open on Thursday, October 8th. Ahead of this, we raise our Q3E same-store sales forecasts for the U.S. (by +100 basis points, to +15.0%; according to Consensus Metrix sell-side consensus is at +13.4%) and International (by +50 basis points, to +5.0%; consensus is at +2.1%).

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12:00 AM

DPZ Updating Our Forecasts (Again)

Less than a week ago, we raised our Q3E same-store sales and EPS estimates in our report “DPZ: Updating Our Forecasts” (today’s report is best read in conjunction with that report). With this report, we further take up our Q3E same-store sales projection for Domino’s International business, by +150 basis points to +4.5%. Sellside consensus (according to Consensus Metrix) is at +2.0% as of this writing.

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12:00 AM

DPZ Updating Our Forecasts

With this report, we raise our Q3E same-store sales forecasts and EPS estimate for Domino’s. For U.S. same-store sales, we move up our Q3E projection by +200 basis points, to +14.0% (above current sell-side consensus of +12.1%, according to Consensus Metrix). We believe that U.S. quick-service pizza sector same-store sales momentum coming off of an exceptional Q2 has been retained to a greater degree than anticipated so far into Q3, and it’s likely Domino’s — the largest pizza concept in the U.S. — is participating in this trend.

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12:00 AM

DPZ (Post-Call) Q2 Serves Up Hot Results Will Q3 Take Flight with Wings

Earlier today, Domino’s (DPZ; Buy, $408.48) reported Q2 EPS of $2.99, well ahead of our $2.15 forecast and sell-side consensus (according to Consensus Metrix) of $2.27. Even excluding a better-than-expected tax rate (4.7% actual vs. our 19.4% estimate and consensus of 17.8%), Q2 EPS would have been +37 cents better than our forecast and +30 cents better than consensus. Better-than-expected G&A/ Revenues (9.6% actual vs. our 11.5% estimate and consensus of 10.6%) accounted for +23 cents of the EPS beat relative to consensus.

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12:00 AM

Quick-Service Pizza Market Share Opportunities for DPZ & PZZA

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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12:00 AM

DPZ Even Our High on the Sell-Side Q2E U.S. Comp Forecast Proves Too Low

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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12:00 AM

DPZ Updating Our Rating on Domino’s

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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12:00 AM

DPZ (Post-Call) Investments and Currencies Likely to Slice Q2 EPS

Earlier today, Domino’s (DPZ; Neutral, $364.00) reported Q1 EPS of $3.07, well above our $2.35 forecasts and sell-side consensus (according to Consensus Metrix) of $2.32. The earnings beat is largely due to tax rate, which came in at -3.7% (i.e., a helpful tax rate) vs. our 19.0% forecast and consensus of 18.7%. If the Q1 tax rate had been 19.0% (and nothing else in the Q1 income statement was changed), we estimate that Q1 EPS would have been about $2.40 — an earnings beat, but nevertheless not quite as good as what appeared at first glance. On today’s conference call, management commented that the Q1 tax rate reflected “tax benefits on equitybased compensation,” and that it anticipates continued volatility in the tax rate going forward.

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12:00 AM

DPZ Updating Our Same-Store Sales and EPS Estimates for 2020E & 2021E

We adjust our U.S. blended (company-owned and franchised combined) same-store sales estimates for Domino’s (DPZ; Neutral) as follows:
Q1E 2020: down by -190 basis points to an actual of +1.6%
Q2E 2020: down by -240 basis points to +0.6%
Q3E 2020: down by -190 basis points to +2.1%
Q4E 2020: stays at +3.5%
Full-year 2020E: down by -170 basis points to +2.0%
Full-year 2021E: up by +50 basis points to +3.5%

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12:00 AM

DPZ (Post-Call) Updates Long-Term SameStore Sales Targets

Earlier today, Domino’s (DPZ; Neutral) reported Q3 EPS of $2.05, a little short of our $2.09 forecast and sell-side consensus of $2.07. Tax rate (21.7% actual vs. our 20.0% projection) accounts for the difference between our EPS estimate and the actual.

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12:00 AM

DPZ Introducing Some EPS Estimates Update on Plant-Based Beef

With this report, we introduce our quarterly EPS estimates for 2020E for Domino’s (DPZ; Neutral) as follows: (1) Q1E $2.40, (2) Q2E $2.32, (3) Q3E $2.40, and (4) Q4E $3.58. These quarterlies sum to our unchanged full-year 2020E EPS forecast of $10.70. Please keep in mind that 2020 is a 53-week fiscal year for Domino’s.

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12:00 AM

DPZ Changing Our Rating on the Shares of Domino’s

With this report, we downgrade the shares of Domino’s (DPZ) to Neutral (from Buy). Our downgrade reflects (1) growing concerns that over the next 12-18 months, competition from third-party delivery aggregators will have a larger (i.e., worse) effect on Domino’s U.S. same-store sales than they did over the last 12-18 months, (2) our worries that the law of large numbers may have finally caught up with Domino’s U.S. following the annual +5.4% to +12.0% same-store sales gains of 2013-18, (3) rising competition from the leading fast-casual pizza concepts, particularly privately-held Blaze Pizza, whose co-founder Rick Wetzel comments “There’s a huge opportunity to go at Domino’s in particular,” and (4) the possibility of a reinvigorated Papa John’s (PZZA; Buy) down the road, given that concept’s recent hire of a new “change agent” CEO.

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12:00 AM

DPZ Update to 2019 Franchise Disclosure Document Provides More Info

In our June 17th report “DPZ: 2019 Franchise Disclosure Document Review for Domino’s,” (see also our June 18th “DPZ: Clarification re: 2019 Franchise Disclosure Document Review for Domino’s”) we included tables showing average weekly unit sales and median weekly unit sales for franchised, company-owned, and combined Domino’s U.S. stores for 2013-17 because — as of June 17th — data in this respect for 2018 was not yet part of the Franchisee Disclosure Document (FDD). However, Domino’s recently updated its 2019 FDD, and now includes this information for 2018. As such, here is that information for 2014-18:

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12:00 AM

DPZ The Low Point for The New Normal… Or Not

Earlier today, Domino’s (DPZ; Buy) reported second-quarter EPS of $2.19, ahead of our $2.04 forecast and sell-side consensus (according to Consensus Metrix) of $2.02. However, a lower-than-projected tax rate of 12.9% (versus our 20.5% projection and consensus of 19.8%) helped EPS by about $0.20 relative to our forecast. On the other hand, EPS was hampered by about $0.04 related to a loss on the sale of 59 New York City area stores. Taking the tax-rate and refranchising loss issues out, Q2 EPS would have been one cent below our forecast and one cent above sell-side consensus.

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12:00 AM

Correlating Grubhub Data and U.S. Restaurant Sectors Same-Store Sales Trends

With third-party delivery aggregators continuing to grow, providing additional convenience to the consumer, we decided to look at various quarterly data provided by Grubhub (GRUB; Not Rated), correlating these data sets with various sectors’ same-store sales (for U.S. chain restaurants). To do this, we used six different Kalinowski Restaurant Industry Index sector indices, which are sorted by brand type and based on the weighted-average components from 48 different publiclytraded restaurant concepts. (The weightings are based on each concept’s 2018 U.S. systemwide sales, as measured by Technomic.)

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12:00 AM

DPZ Clarification re 2019 Franchise Disclosure Document Review for Dominos

In our Domino’s (DPZ; Buy) report published yesterday (“DPZ: 2019 Franchise Disclosure Document Review for Domino’s”), we noted that “The Royalty Fee for a Domino’s U.S. franchisee is 5.5% of sales, and the Advertising Fund contribution for a Domino’s U.S. franchisee is 4% of sales.” We want to clarify that at present, Domino’s U.S. franchisees are funding the Domino’s National Advertising Fund (DNAF) at a rate of 6% of sales, as the other 2% that would typically go to the advertising cooperative under section 13.2 of Domino’s standard franchise agreement is instead being rolled up into DNAF (resulting in the 6% being paid to DNAF). So it’s a rate of 6% of sales for all franchisees, with the exception of incentives.

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12:00 AM

DPZ 2019 Franchise Disclosure Document Review for Dominos

Not too long ago, Domino’s (DPZ; Buy) filed its 600+ page Franchise Disclosure Document (FDD) for 2019. In this report, we cite some of the highlights from that document following our review of it, including our review of it in comparison to last year’s Franchise Disclosure Document. For example, in 2018, the Advertising Fund spent $401,643,843. This was an +11.1% increase over what the Advertising Fund spend in 2017. On top of this, during 2018, the Advertising Fund spent 85.6% of this on Media Placement (or approximately $343,807,130), versus an 84.27% rate during 2017 (or approximately $304,044,399). In dollar terms, this was an increase of +13.1%. We maintain our Buy rating on DPZ and note the following:

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12:00 AM

DPZ Our Meeting with Management in Ann Arbor

We recently met with Domino’s (DPZ; Buy) — including CEO Ritch Allison, Executive Vice President and CFO Jeff Lawrence, and Director of Investor Relations Chris Brandon — in Ann Arbor, Michigan. We thank them for their time! Topics of interest that were asked about include Domino’s plans to fight off delivery aggregators and other competition (“The good news is, the strategies to play offense against the aggregators are exactly the same as the strategies to play offense against the traditional competition.”), how crisis (such as the possibility of higher protein costs given the risks brought about by African swine fever) could be a net positive for Domino’s, and Domino’s current thoughts regarding plant-based proteins (“We don’t have any imminent plans in place, but we have to stay on top of it and see what consumers are going to do.” Management said that when they have tried some of the latest plant-based offerings, the “flavor and texture are shockingly close” to real beef). We reiterate our Buy rating on DPZ, and note the following:

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12:00 AM

DPZ (Post-Call) Investors Getting Used to Domino’s New Normal

Earlier today, Domino’s (DPZ; Buy) reported Q1 EPS of $2.20, ahead of our $2.10 forecast and sell-side consensus (according to Consensus Metrix) of $2.09. The Q1 tax rate came in at 15.1%, more favorable than our 20.5% estimate (and 20.5% consensus). By our math, had the Q1 actual tax rate been 20.5%, then all else equal, Q1 EPS would have been $2.06.

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12:00 AM

DPZ The Night King Commands Us to Update Our Forecasts Ahead of the Q1 Release

Ahead of Domino’s (DPZ; Buy) first quarter earnings release scheduled for before the market open on Wednesday, April 24th, we raise our Q1 U.S. (blended) samestore sales forecast by +160 basis points, to +4.5%. Based on our checks, we believe that Domino’s latest ad campaign — centered around “Points for Pies” — has been successful. Consumers apparently have responded well to the aspect of this that points can be earned from “eating any pizza you love, from anywhere. Yep, even if it’s not Domino’s.” Of course, many of the things that Domino’s has done well for years — an improved core product, technological excellence, the “Piece of the Pie Rewards” loyalty program, etc. — are all playing an integrated role in what appears to have been another successful quarter for the brand.

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12:00 AM

A Quick Look at the Fastest-Growing Restaurant Brands in the U.S.

During 2018, 175 restaurant brands generated at least $200 million in U.S. systemwide sales, according to data compiled by Technomic. For these 175 brands, which ones were the fastest growing? In this report, we look at the top 20 brands of these 175 that expanded their U.S. systemwide sales at the fastest rate last year.

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12:00 AM
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