Domino’s Pizza Withdraws Its Guidance, Stock Falls

Domino’s Pizza (NYSE:DPZ) stock fell in the pre-market session on March 31. The restaurant chain pulled its guidance due to the coronavirus outbreak. The Gap (NYSE:GPS) and Target (NYSE:TGT) also withdrew their financial guidance due to the pandemic. The pizza chain gave its preliminary estimates for its global retail sales and comparable sales results in the first quarter. Domino’s Pizza is slated to report its first-quarter earnings on April 23.

Notably, Domino’s withdrew its financial guidance for fiscal 2020. On February 20, the company reported its fourth-quarter earnings results and gave its outlook for the next two to three years. Domino’s management forecasted its comparable sales in the US to rise by 2%–5%. The company also expected international comparable store sales to increase by 1%–4%, excluding currency impact. Notably, the company planned to increase the restaurant store count by 6%–8% in the next two to three years.

Domino’s Pizza stock fell 6.24% in the pre-market trading on Tuesday as of 9:24 AM ET. The stock fell by more than 6% during the trading session on the same day. Meanwhile, Domino’s shares grew by 2.4% on Monday and closed the trading day at $346.75. The company’s returns increased by about 2.4% during March as of Monday. So far, the company’s returns have risen more than 18% YTD (year-to-date).

The pizza chain provided disappointing preliminary results for the first quarter of 2020. The company made the decision to update its shareholders and investors about how the coronavirus has impacted its business. Domino’s CEO Ritch Allison said that the company’s global retail sales have increased by 4.4% in the first quarter as of March 22. While US retail sales grew 4.9%, the company saw retail sales growth of around 3.9% in the international markets in the first quarter. Excluding the impact of foreign currency, global retail sales spiked by 5.9% in the first quarter. In comparison, global retail sales rose by 6.9% in the fourth quarter. During the fourth quarter, US retail sales grew by 6.8%, while international retail sales increased by 7%.

The comparable store sales in the US grew by 3.9% in the first quarter as of March 22. US franchise store comparable sales rose by 1.5%, while US stores comparable sales rose by 1.6% in the first quarter. International store comparable sales (excluding currency) also rose by 1.5% in the first quarter. Initially, Domino’s sales were weak in China due to COVID-19, but the sales recovered in the last few weeks of the first quarter. In comparison, the company’s comparable sales in the US were 3.4% in the fourth quarter. The company’s international comparable sales were 1.7% in the fourth quarter.

Domino’s also added 69 net new stores in the first quarter of 2020 as of March 22. Notably, the stores don’t include store closures due to the COVID-19 pandemic. The company has closed many stores in international markets to reduce the risk of spreading the coronavirus. Out of 1,400 international stores that are temporarily closed, around 900 stores are in France, Spain, New Zealand, and Panama.

Meanwhile, Domino’s has kept most of its stores open in the US. The company’s corporate stores and franchisees are on a hiring spree. On March 20, the company estimated that it would need over 10,000 employees across the US. The job openings were for delivery drivers, pizza makers, customer service representatives, and managers. The company thinks that since people have to stay home amid the coronavirus pandemic, its home-delivery option should surge in the near term.

Like Domino’s, Walmart (NYSE:WMT) and Amazon have also hired employees across their supply chains amid the coronavirus outbreak. Walmart announced cash bonuses for all of its hourly employees in the US.

For the first quarter of 2020, Wall Street analysts expect Domino’s net sales to grow by 4.25% YoY. Analysts expect Domino’s 2020 revenue to grow 6.72% YoY compared to 2019 sales growth of 5.42%. Meanwhile, analysts expect the company’s first-quarter EPS to grow by 6.77% YoY. Analysts think that the EPS growth for 2020 could be 9.86%. In comparison, the adjusted EPS grew by 13.66% in 2019.

After disappointing preliminary first-quarter sales results, two Wall Street analysts slashed the target price on Domino’s Pizza stock. Guggenheim slashed the target price on the stock to $389 from $392. Credit Suisse also cuts the target price on the stock to $380 from $390.

Analysts have given a 12-month mean target price of $356.73 on Domino’s Pizza stock. The stock was at a 2.9% premium to the current price on Monday. Meanwhile, among the 27 analysts covering the stock, 14 analysts recommend a “buy,” while 13 recommend a “hold.” None of the analysts recommend a “sell.”