Join Hedgeye's Restaurants team – led by Howard Penney – for a live Black Book presentation August 15th, 2017 at 1:00PM EST to discuss our SHORT thesis on Domino’s Pizza (DPZ).
Email sales@hedgeye.com for more information.
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We believe DPZ is beginning to see increasing competitive pressures both domestically and abroad.
In addition, we are adding Domino’s Pizza Group (DOM-GB) and Domino’s Pizza Enterprises (DMP-AU) to our Best Ideas list as SHORTS, both of which we also believe are experiencing a deceleration in their respective businesses.
When we first broached the topic of a slowing DPZ business, it was at the tail-end of our PNRA Black Book (January 2017). With over 27% pizza delivery market share, DPZ is undoubtedly a behemoth in the industry.
However, it is clear that parts of the business have already begun to slow, namely the UK business, as competitors such as MCD (a Best Idea LONG; please email us if you would like access to our most recent MCD Black Book), Deliveroo, Hungryhouse, Pizza Hut, OneDelivery, UberEats, and Just Eat continue to put added pressure on that part of the business.
Other issues the company will face in the coming quarters and years:
- For the first time in a decade, there is real competition to DPZ’s stranglehold in the delivery market.
- Pizza Hut is upping spending significantly in 2H17 and the franchisees are better organized.
- McDonalds and UberEats make for a strong global team and they are going after the price-focused/value-oriented DPZ customer.
- MCD is not the only player who is aggressively going after the global delivery market.
- The Company’s leverage is a negative in a rising rate environment and the recent recapitalization is in the rear-view mirror.
- There are new incremental investments that will come on at lower returns.
- Is management’s compensation structure too aggressively linked to “stock price return?”
The Key Points we will review during our presentation include:
- Competitors are revving their engines
- Short Domino's globally (DOM-GB, DMP-AU)
- Financial engineering is in the past
