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Domino’s share price lower after COVID-19 update

The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price is on watch this morning after the company released an update on the impact of COVID-19 on its operations.

At the time of writing, the Domino’s share price was 7.48% lower at $51.22, while the S&P/ASX 200 Index (ASX: XJO) was down 6.80%.

The company operates across more than 2,600 stores in nine countries and is following the advice of government and health authorities to try to ensure stores can continue to operate.

Update on COVID-19

Domino’s has implemented procedures to offer customers zero contact delivery and takeaway in all markets. If necessary, Domino’s is prepared to move to 100% zero contact ordering in the near future. This could include a move to 100% zero contact delivery only if required in certain markets. 

CEO Don Meij said, “teams in all nine countries have been monitoring government health recommendations and requirements, reviewing and updating operational procedures and business continuity processes to ensure, as far as practicably possible, stores can continue to operate in this unprecedented environment.”

In France, the government has taken steps to limit the opening of many businesses as part of the strategy to deal with COVID-19. Carry-out and delivery procedures are not currently impacted by these initiatives, with stores in France permitted to serve customers through delivery and carry out currently. Domino’s has some 400 stores across France. 

In the Netherlands, government regulations mean that Domino’s has now ceased dine-in at its stores but delivery remains unaffected. Notably, Domino’s is not predominantly a dine-in restaurant business, being focused instead on delivery and carry out. 

The COVID-19 situation is rapidly evolving, especially in Europe, however, management is confident in the ability of stores to rapidly update procedures to reflect local conditions. Domino’s believes it is possible to safely prepare millions of meals for customers each week and deliver them to those who are staying at home. 

Recent half-year results

In its first-half results, Domino’s reported positive sales momentum in all European countries, with sales in the region up 9.4% to €382.8 million. European earnings before interest, tax, depreciation and amortisation (EBITDA) increased 15.6% to €29.4 million. 

Globally, Domino’s increased food sales by $151.3 million to $1.58 billion during the half-year and was on track to surpass $3 billion in food sales in FY20. Strong sales and profitability growth in Europe were offsetting short-term domestic headwinds. Twelve new stores were opened in France in the first half contributing to 37 new stores opened in Europe. 

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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