Domino's (DPZ) Reveals Increased Earnings, But Pulls its Full-Year Guidance

Domino's Pizza (NYSE: DPZ) recently rolled out a bit of a mixed bag in terms of news for the company, and the result was a bit like a pizza with burnt crust. The news on the surface looked pretty good, but once you got under the bubbly cheese of sales figures, the crust beneath got a little black and crunchy. So black and crunchy, in fact, that the company pulled its full-year guidance off the table altogether.

The Cheese of Same-Store Sales Is Clean and Sharp

The good news here is that Domino's pulled out a real win in same-store sales figures for the first third of the second quarter. Sales were up fully 7.1%, which is no mean feat, and were actually well beyond levels the company had already forecast. Domino's was previously figuring same-store sales hikes between 2% and 5% in the US, while looking for 7% to 10% growth worldwide.

The company also rolled out some of the numbers for the first quarter, which for Domino's, ended March 22. The company revealed that it had brought in $873.1 million in revenue, which worked out to earnings of $3.07 per share. First-quarter net income, meanwhile, came in at $121.6 million.

This went well for just about every point of comparison: expected earnings per share were $2.32, and that on revenue of $868.7 million, which means Domino's beat revenue by a fair margin, but blew away the EPS figures.

This is Where the Crust Starts Smelling a Bit Smoky

However, Domino's also pulled its two-year and three-year guidance figures, citing the sheer amount of uncertainty unleashed by the coronavirus pandemic.

Some might wonder here, though, if Domino's is laboring under the same excess of caution that has swept the entire nation of late. It also brought out the numbers for the first month of the second quarter, and they were even better than expected. We've already mentioned the 7.1% jump in same-store figures—stores open at least a year—but overall sales did even better as the chain posted 10.7% gains overall, which includes stores not open a full year yet.

Fantastic news by any measure, but the picture gets a lot worse outside of the US. Same-store sales dropped 3.2% in the second quarter's first three weeks. Most US locations have survived closure, since their business model depends heavily on delivery and carry-out options. No one goes to Domino's for the pleasant ambiance and the high-caliber orchestral selections, after all. That's a different story in other countries, however, as around 1,750 Domino's locations have been shut down as of April 21, with little sign of reopening in sight.

But Are The Toppings Okay?

 We know that Domino's domestically is looking pretty good right now. The company has around $200.8 million in cash and cash equivalents, giving it a nice cushion to work with. US sales are up and looking good as people look for a quick, cheap, and fairly pleasant dinner alternative and something as simple as eating at a restaurant is off the table for at least another week, depending on what state you're in. The company's even continuing to pay a dividend of $0.78, so that's a definite point in its favor.

It was probably for the best that Domino's pulled guidance. We're having a tough enough time projecting what the world is going to look like in two months, let alone two years. With ongoing knock-on effects likely to crop up everywhere for the foreseeable future, it's going to be impossible to tell what will happen when, if at all.

While many of us are expecting that people will return to work soon—some much sooner than others, apparently, and some maybe not for another month or more—the impact of the last six weeks on consumer confidence is likely to be disastrous. Yes, many will be seeing $1,200 stimulus checks starting to arrive—the paper checks weren't even set to show up until at least May 1 in many cases—and many workplaces will also be buoyed by the Paycheck Protection Program, assuming they managed to get in through the crowd rushing for the same exit. Yet will many be interested in engaging in consumer spending much beyond the basics, with work so shaky and stimulus checks clearly a one-time deal?

All of this is enough to make one wonder if there's still room for pizza. For most of us, there likely will be. For some of us, maybe not again for a good long while.