While the financial and energy sectors of the U.S. economy are taking a hit to earnings due to the coronavirus and oil price fluctuations, take-out and delivery chains like Domino’s Pizza are actually doing quite well.
Thursday, Domino’s Pizza Inc. (NYSE: PDZ) estimated a 7.1% growth in same-store sales during the first four weeks of the second quarter.
The figures came at the same time the company reported a 4.4% jump in global sales in the first quarter of 2020, and the company’s stock is thriving in the pandemic environment.
Shares of Domino’s are up 7% over the past month, and up nearly 28% over the past three months as of lunchtime today on the East Coast.
Domino’s Pizza CEO Ritch Allison said the company “is in a very strong financial position, both at brand and franchisee levels.”
The company did pull its two- and three-year guidance due to uncertainty over the impact of the coronavirus on future sales.
“What I do know is that our franchisees and teams in the U.S. and across the globe will remain focused on safely serving our customers and our communities in this time of need,” Allison said in a statement. “I have great confidence in our people and our ability to manage through this crisis, and I remain optimistic about the long-term potential of the Domino’s brand.”
Domino’s Pizza Isn’t Alone in Thriving
Another restaurant chain that appears to be going strong despite the COVID-19 pandemic is Chipotle Mexican Grill Inc. (NYSE: CMG).
The company reported a 3.3% increase in Q1 restaurant sales year over year. Its revenue also beat Wall Street estimates.
Since hitting a low of $415 on March 18, Chipotle stock has surged back around 94% in just a month, fueled by the passing of the $2.2 trillion CARES Act and optimism for the development of its delivery and curbside services, and its digital platform.
Chipotle stock has only lost 3.4% of its value year to date, and it’s outperforming some of its biggest competition. During the same time frame, McDonald’s Corp. (NYSE: MCD) has dropped 8.1%, Starbucks Corp. (Nasdaq: SBUX) has fallen 14.3% and Shake Shack Inc. (NYSE: SHAK) is down 22.1%.
To stem the tide of lost sales due to the pandemic, Chipotle management halted its stock buyback program. It’s also expecting a liquidity boost of around $100 million. That comes from deferring Social Security tax payments and accelerating tax depreciation in previous returns allowed by the CARES Act.
Like many other companies, Chipotle deferred its full-year 2020 outlook because of COVID-19 uncertainty.
What we see here is a pair of companies in the restaurant sector that seem to have a firm hold on weathering the economic impact of the coronavirus — and they’re share prices are reflecting it.
Both companies seem positioned with solid liquidity and have implemented measures to strengthen their balance sheets.
While we have already recommended Domino’s Pizza as a buy. Chipotle is well worth a look as these restaurants survive the pandemic.
Editor’s note: We recommended Domino’s as one of 3 Stocks to Buy When the Market Rebounds.