雅虎香港財經 Here's Why You Should Retain Domino's (DPZ) in Your Portfolio
Domino's Pizza, Inc. DPZ will likely benefit from solid comps growth, technological enhancements and unit-expansion efforts. This and the emphasis on menu additions bode well. However, inflationary pressures and staffing challenges are a concern.
Let’s discuss the factors highlighting why investors should retain the stock for the time being.
Factors Driving Growth
Domino's continues to impress investors with solid global comps growth. During the fiscal first quarter, Global retail sales (including total franchise and company-owned units) increased 2.2% on a year-over-year basis in the fiscal first quarter. The upside was driven by higher U.S stores (up 5.1% year over year). Excluding foreign-currency impacts, global retail sales increased 5.9% from the prior-year quarter’s levels. At domestic company-owned stores, Domino’s comps increased 7.3% year over year against a decline of 10.5% reported in the year-ago quarter. Comps at international stores, excluding foreign-currency translation, inched up 1.2% year over year. During the quarter, the company stated benefits from lapping Omicron (from 2022) and the addition of a boost week (in 2023).
Domino’s invests heavily in technology-driven initiatives like digital ordering to bolster sales. Domino’s digital loyalty program — Piece of the Pie Rewards — continues to contribute significantly to traffic gains. The extended ways to order a pizza have kept Domino’s at the forefront of digital ordering and customer convenience. Other digital enhancements in ordering, selecting service methods, paying and tipping were implemented to enhance the consumer experience. During the first quarter of fiscal 2023, the company initiated the roll out of electric vehicles for pizza delivery. Apart from this, enhanced make-line and cut-table technology and AI-enabled forecasting are being rolled out for better matching of demand with capacity. The initiatives are likely to enhance the speed, accuracy and efficiency of services.
Increased focus on menu additions bodes well. During the first quarter of fiscal 2023, the company announced the launch of a potato side menu, Loaded Tots, and reported solid feedback with respect to the same. Backed by its strong margin profile, the company reported healthy ticket drive for its franchisees. It also outperformed the previous product launches of Dips & Twists and the Chicken Taco and Cheeseburger specialty pizza. Given the alignment with the company’s Mix & Match menu, the company is optimistic in this regard and anticipates the initiative to provide an incremental margin dollar lift in the upcoming periods.
Since Domino’s generates a chunk of its revenues from outside the United States, the company is committed to accelerating presence in high-growth international markets to boost business. The company’s international growth continues to be strong and diversified across markets, courtesy of exceptional unit-level economics. During the fiscal first quarter, the company added 22 net new stores in the United States, thereby bringing the total U.S. system store count to 6,708 stores. During the quarter, its international business added 106 net new stores. Also, it is confident about its two to three-year outlook of 5-7% in annual global net store growth.
Concerns
Image Source: Zacks Investment Research
Shares of Domino's have declined 18% in the past year against the industry’s rise of 20.1%. The downside was primarily caused by inflationary pressures and staffing challenges. Although the company initiated certain actions to improve staffing levels, complete recovery is likely to take time. The company is cautious about the ongoing uncertain macroeconomic environment.
Zacks Rank & Key Picks
Domino's currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector are Chipotle Mexican Grill, Inc. CMG, Arcos Dorados Holdings Inc. ARCO and Chuy's Holdings, Inc. CHUY.
Chipotle sports a Zacks Rank #1 (Strong Buy). CMG has a long-term earnings growth rate of 31.8%. The stock has improved 47.7% in the past year. You can see the complete list of today’s Zacks Rank #1 stocks here.
The Zacks Consensus Estimate for Chipotle’s 2024 sales and EPS suggests growth of 12.4% and 19.6%, respectively, from the year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth rate of 9.5%. The stock has gained 15.2% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests growth of 13.4% and 4.4%, respectively, from the year-ago period’s levels.
Chuy’s Holdings carries a Zacks Rank #2. CHUY has a trailing four-quarter earnings surprise of 23.4%, on average. Shares of CHUY have increased 59.7% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 9.9% and 24.8%, respectively, from the year-ago period’s levels.
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Domino's Pizza Inc (DPZ) : Free Stock Analysis Report
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