By Mark Kalinowski
Published on September 3, 2019 at 12:00 AM
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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By Mark Kalinowski
Published on July 18, 2019 at 12:00 AM
Ahead of Starbucks’ (SBUX) fiscal Q3 earnings release scheduled for after the market close on Thursday, July 25th, we upgrade SBUX to Buy (from Neutral). Some of the concerns we had 3-6 months ago have been alleviated to a meaningful degree, including (1) the possibility that a serious run for office by former CEO Howard Schultz could have an adverse effect on the business; Mr. Schultz has put his campaign on hold which significantly alleviates this risk, and (2) concerns about competition in China — public filings by Luckin Coffee (LK; Not Rated) — which had its IPO this past May — give us a greater comfort level that near-term competitive threats in this key growth market can be fought off.
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By Mark Kalinowski
Published on May 30, 2019 at 12:00 AM
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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