Domino's (NYSE:DPZ) stock has outperformed during the recent stock market slump as investors bet that COVID-19 containment measures will do good things for its business. The pizza delivery leader confirmed as much in late March when it said most of its stores have remained open and sales are growing despite challenges such as sporting event cancellations and the closing of schools and universities.
But all the optimism has raised the stakes for Domino's upcoming earnings report, set for release on Thursday, April 23. So, let's look at the metrics that will show whether the chain is seeing a significant boost to its business right now.
Mixed COVID-19 impacts
Executives said in a business update in late March that COVID-19 was having a mixed impact on demand. While restaurant closures and stay-at-home orders have more consumers opting for delivery, Domino's has also lost important revenue streams such as on-premise sales at concerts and sporting events. Many of its selling points in schools and universities around the country have closed, too.
The overall impact is clearly positive, though. Yum! Brands' Pizza Hut franchise noted soaring demand in recent weeks as it looked to hire 30,000 additional employees. Domino's announced a similar hiring binge, and Papa John's announced accelerating gains through most of March.
These companies have all withdrawn their short-term outlooks due to the fluid nature of demand, and that's why there's uncertainty about Domino's expansion pace. Still, the chain likely saw modest sales increases at around the same rate as last quarter, which would translate into significant market share wins from other parts of the fast-food and restaurant niches.
Cash and expenses
The fragile economic environment has put investors' focus more toward cash flow concerns, and that's especially true for a company like Domino's, which maintains a significant debt load. To date, there's been no need to worry about a potential liquidity squeeze since revenue hasn't collapsed and the chain's supply network appears to be humming right along.
Domino's drew down the rest of its short-term credit facility in late March as a precaution anyway, and on Thursday shareholders should hear more about how executives are managing the finances so that they don't risk a cash crunch if economic trends fail to rebound quickly.
The restaurant chain withdrew its prior outlook that had called for comparable-store sales growth of between 2% and 5% in the U.S. market and gains of between 1% and 4% in its international segment. CEO Ritch Allison and his team likely won't issue another forecast on Thursday since the COVID-19 situation is still so fluid. But they might have some positive comments about the eventual global rebound, especially if growth has continued to accelerate in China after stalling in February.
That outlook will depend on several factors that can't be predicted right now, including the timing of store reopenings in markets like France, Spain, and New Zealand, and the resumption of entertainment events in North America. Yet executives have said that Domino's is well-positioned to thrive in this sales environment. That's why investors will be looking for outlook comments from management that echo this optimistic reading.