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Category: Domino's Pizza (DPZ)
Date: 21 June 2020 Stock price of Domino's Pizza: $378.41 We take a look at the business update provided by Domino's Pizza (DPZ), the world's largest Pizza franchise group, following the Covid-19 related lockdowns and stay at home orders across various states in the USA and across the world.
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Domino’s is the largest pizza company in the world based on global retail sales, with more than 17,000 locations in over 90 markets around the world as of December 29, 2019. "
More About Domino's Pizza (DPZ)
Domino’s is the largest pizza company in the world based on global retail sales, with more than 17,000 locations in over 90 markets around the world as of December 29, 2019. Founded in 1960, our roots are in convenient pizza delivery, while a significant amount of our sales also come from carryout customers. Although we are a highly recognized global brand, we focus on serving neighborhoods locally through our large global network of franchise owners and U.S. Company-owned stores.
The Company is primarily a franchisor, with approximately 98% of Domino’s stores currently owned and operated by independent franchisees. Franchising enables an individual to be his or her own employer and maintain control over all employment-related matters and pricing decisions, while also benefiting from the strength of the Domino’s global brand, operating system and financial resources. The Domino’s business model is straightforward: Domino’s stores handcraft and serve quality food at a competitive price, with easy ordering access and efficient service, enhanced by our technological innovations. Our hand-tossed dough is made fresh and distributed to stores around the world by us and our franchisees. Domino’s generates revenues and earnings by charging royalties and fees to our franchisees.
Royalties are ongoing percent-of-sales fees for use of the Domino’s® brand marks. The Company also generates revenues and earnings by selling food, equipment and supplies to franchisees through our supply chain operations, primarily in the U.S. and Canada, and by operating a number of our own stores. Franchisees profit by selling pizza and other complementary items to their local customers. In our international markets, we generally grant geographical rights to the Domino’s Pizza® brand to master franchisees. These master franchisees are charged with developing their geographical area, and they may profit by sub-franchising and selling food and equipment to those sub-franchisees, as well as by running pizza stores.
We believe that everyone in the system can benefit, including the end consumer, who can purchase Domino’s menu items for themselves and their family conveniently and economically. The Domino’s business model can yield strong returns for our franchise owners and Company-owned stores. It can also yield significant cash flows to us, through a consistent franchise royalty payment and supply chain revenue stream, with moderate capital expenditures. We have historically returned cash to shareholders through dividend payments and share repurchases.
The Company is primarily a franchisor, with approximately 98% of Domino’s stores currently owned and operated by independent franchisees. Franchising enables an individual to be his or her own employer and maintain control over all employment-related matters and pricing decisions, while also benefiting from the strength of the Domino’s global brand, operating system and financial resources. The Domino’s business model is straightforward: Domino’s stores handcraft and serve quality food at a competitive price, with easy ordering access and efficient service, enhanced by our technological innovations. Our hand-tossed dough is made fresh and distributed to stores around the world by us and our franchisees. Domino’s generates revenues and earnings by charging royalties and fees to our franchisees.
Royalties are ongoing percent-of-sales fees for use of the Domino’s® brand marks. The Company also generates revenues and earnings by selling food, equipment and supplies to franchisees through our supply chain operations, primarily in the U.S. and Canada, and by operating a number of our own stores. Franchisees profit by selling pizza and other complementary items to their local customers. In our international markets, we generally grant geographical rights to the Domino’s Pizza® brand to master franchisees. These master franchisees are charged with developing their geographical area, and they may profit by sub-franchising and selling food and equipment to those sub-franchisees, as well as by running pizza stores.
We believe that everyone in the system can benefit, including the end consumer, who can purchase Domino’s menu items for themselves and their family conveniently and economically. The Domino’s business model can yield strong returns for our franchise owners and Company-owned stores. It can also yield significant cash flows to us, through a consistent franchise royalty payment and supply chain revenue stream, with moderate capital expenditures. We have historically returned cash to shareholders through dividend payments and share repurchases.
Quick facts about Domino's Pizza (DPZ)
- Domino's Pizza is listed on the New York Stock Exchange under share code ticker: DPZ
- Domino's Pizza market capital: $14.8 billion (as at 12 June 2020)
- Number of employees of Domino's: 13 100
- Number of stores in the USA: 6 126
- Revenues in 2019: $3.62 billion
- Earnings per share in 2019: $9.56
- Shares in issue: 40.776 million
- Dividends paid during 2019: $2.60
- Cash on balance sheet: $190.6 million
Domino's Pizza (DPZ) business update
ANN ARBOR, Mich., May 26, 2020 /PRNewswire/ -- Domino's Pizza, Inc.(NYSE: DPZ), the largest pizza company in the world based on global retail sales, today announced preliminary information from the first eight weeks of the second quarter in advance of its second quarter earnings release on Thursday, July 16, 2020 in light of the dynamic situation related to the COVID-19 pandemic.
Statement from Ritch Allison, Domino's Chief Executive Officer:
Today we are providing a business update which includes preliminary sales results from the first eight weeks of the second quarter. We are doing so in the spirit of transparency, and due to the material increase in U.S. same store sales that we have experienced subsequent to our first quarter earnings release on April 23. Following today's update, we intend to return to our normal quarterly reporting cadence, beginning with our full second quarter results in July.
On behalf of our global Domino's system of franchisees and corporate team members, we are absolutely privileged to have the opportunity to serve our customers and our communities with a convenient, affordable and safe food and service experience. We are humbled by, and will never take for granted, the trust that customers have placed in our brand and people. We appreciate it more than ever during these challenging times.
Our U.S. sales results accelerated materially over weeks five through eight of the second quarter when compared to weeks one through four. We are seeing a tailwind as consumer behavior across the restaurant industry has shifted toward delivery and carryout, though we are not sure whether this trend will continue for the remainder of the second quarter or how long this tailwind may last. I am proud of the way the Domino's system has responded rapidly to the COVID-19 environment, innovating across all aspects of our operations and our digital platforms to provide a contactless delivery and carryout experience, which is just one aspect of the unwavering commitment that we and our franchisees have to the safety of our customers and team members. We will continue to focus on providing our franchisees and stores with tools to remain operationally and financially healthy, and to provide a trusted, safe and affordable option for customers at a time when they need it most.
Our international sales results continue to be choppy – and may be for the foreseeable future. In some markets, sales results are matching or exceeding those that we see in the U.S. In others, where our master franchisees are still experiencing significant operating limitations or temporary store closures, those sales are down materially versus last year. At our peak, we had approximately 2,400 temporary store closures. I am very encouraged to report that our master franchisees continue to reopen stores daily, as they take a safe but proactive approach to getting back to doing what they do best … servicing their customers. We expect that temporary closures, partial-week openings, abbreviated store hours and limited service methods will continue to pressure international same-store and retail sales in the near-term.
In closing, I remain extremely proud of our global operators – from franchisees to general managers and store-level and supply chain center team members. Challenging circumstances always bring out the best in the Domino's system and our COVID-19 response has been no exception. We will continue to be a "work in progress" brand, adapting to this new world, while maintaining our long-term emphasis on great-tasting pizza, value, service and technology. I look forward to updating you again during our second quarter earnings call in July.
Update on International Market Closures Resulting from COVID-19
As of May 24, 2020, nearly all of the Company's U.S. stores remain open, with dining rooms closed and stores deploying contactless delivery and carryout solutions. Based on information reported to the Company by its master franchisees, the Company estimates that as of May 24, 2020, there are less than 900 international stores that are temporarily closed.
Liquidity and Use of Cash Update
As previously disclosed, given the market uncertainty arising from COVID-19, the Company took a precautionary measure and borrowed the remaining availability of $158.0 million under its outstanding variable funding notes during the second quarter of 2020. The Company has since repaid $100.0 million of these borrowings. To date, the Company has continued to generate positive operating cash flow and currently has nearly $250.0 million of cash on hand to provide ongoing financial flexibility. Subsequent to the repayment, the Company currently has $102.0 million of available borrowings under its $200.0 million variable funding notes, net of letters of credit issued of $40.0 million.
Future Business Updates
The Company expects to continue its traditional quarterly reporting going forward and does not intend to issue further intra-quarter business updates related to the COVID-19 pandemic.
Statement from Ritch Allison, Domino's Chief Executive Officer:
Today we are providing a business update which includes preliminary sales results from the first eight weeks of the second quarter. We are doing so in the spirit of transparency, and due to the material increase in U.S. same store sales that we have experienced subsequent to our first quarter earnings release on April 23. Following today's update, we intend to return to our normal quarterly reporting cadence, beginning with our full second quarter results in July.
On behalf of our global Domino's system of franchisees and corporate team members, we are absolutely privileged to have the opportunity to serve our customers and our communities with a convenient, affordable and safe food and service experience. We are humbled by, and will never take for granted, the trust that customers have placed in our brand and people. We appreciate it more than ever during these challenging times.
Our U.S. sales results accelerated materially over weeks five through eight of the second quarter when compared to weeks one through four. We are seeing a tailwind as consumer behavior across the restaurant industry has shifted toward delivery and carryout, though we are not sure whether this trend will continue for the remainder of the second quarter or how long this tailwind may last. I am proud of the way the Domino's system has responded rapidly to the COVID-19 environment, innovating across all aspects of our operations and our digital platforms to provide a contactless delivery and carryout experience, which is just one aspect of the unwavering commitment that we and our franchisees have to the safety of our customers and team members. We will continue to focus on providing our franchisees and stores with tools to remain operationally and financially healthy, and to provide a trusted, safe and affordable option for customers at a time when they need it most.
Our international sales results continue to be choppy – and may be for the foreseeable future. In some markets, sales results are matching or exceeding those that we see in the U.S. In others, where our master franchisees are still experiencing significant operating limitations or temporary store closures, those sales are down materially versus last year. At our peak, we had approximately 2,400 temporary store closures. I am very encouraged to report that our master franchisees continue to reopen stores daily, as they take a safe but proactive approach to getting back to doing what they do best … servicing their customers. We expect that temporary closures, partial-week openings, abbreviated store hours and limited service methods will continue to pressure international same-store and retail sales in the near-term.
In closing, I remain extremely proud of our global operators – from franchisees to general managers and store-level and supply chain center team members. Challenging circumstances always bring out the best in the Domino's system and our COVID-19 response has been no exception. We will continue to be a "work in progress" brand, adapting to this new world, while maintaining our long-term emphasis on great-tasting pizza, value, service and technology. I look forward to updating you again during our second quarter earnings call in July.
Update on International Market Closures Resulting from COVID-19
As of May 24, 2020, nearly all of the Company's U.S. stores remain open, with dining rooms closed and stores deploying contactless delivery and carryout solutions. Based on information reported to the Company by its master franchisees, the Company estimates that as of May 24, 2020, there are less than 900 international stores that are temporarily closed.
Liquidity and Use of Cash Update
As previously disclosed, given the market uncertainty arising from COVID-19, the Company took a precautionary measure and borrowed the remaining availability of $158.0 million under its outstanding variable funding notes during the second quarter of 2020. The Company has since repaid $100.0 million of these borrowings. To date, the Company has continued to generate positive operating cash flow and currently has nearly $250.0 million of cash on hand to provide ongoing financial flexibility. Subsequent to the repayment, the Company currently has $102.0 million of available borrowings under its $200.0 million variable funding notes, net of letters of credit issued of $40.0 million.
Future Business Updates
The Company expects to continue its traditional quarterly reporting going forward and does not intend to issue further intra-quarter business updates related to the COVID-19 pandemic.
Domino's Pizza (DPZ) stock price history
The image below shows the stock price history of Domino's Pizza (DPZ) over the last 3 years. And it's been a pretty good time for DPZ stockholders over the last 3 years. Over the last 3 years the stock of Domino's Pizza (DPZ) increased by 81.90%. And that is a return no investor will say no to.
Our latest stock valuation of Domino's Pizza (24 April 2020)
So what is Domino's Pizza (NYSE: DPZ) stock worth based on the release of their latest earnings report? Based on Domino's Pizza's 1st quarter 2020 earnings report our valuation model provides a target price (full value price) at $193.20 a stock. We therefore believe that the stock is overvalued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target price (full value price) which in this case is $193.20. Thus we see a good entry point into Domino's stock at $173.90 or below. We believe that Domino's stock will pull back in coming weeks and months to levels closer to our target price (full value price).
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target price (full value price) which in this case is $193.20. Thus we see a good entry point into Domino's stock at $173.90 or below. We believe that Domino's stock will pull back in coming weeks and months to levels closer to our target price (full value price).