In a socially distanced, lockdown world people are less likely to venture out.
They want as little contact with strangers as possible.
That means they’re more likely to skip the grocery shop.
And when food supplies run short, they might look for home delivered meals to get them out of a hole or tide them over.
Still, that means you have contact with a delivery driver. A driver that has seen other people during the day.
To ease customer concerns on this front, take away meal operators like Domino’s pizza are introducing a zero contact delivery service.
In a socially distanced world, those that do a better home delivery service are likely to hold up a little better.
And the stock is holding up reasonably well to date. Unlike a lot of stocks, Domino’s is holding the lows from last year.
Domino’s Pizza Enterprises Ltd [ASX:DMP] is the largest Domino’s franchisee, outside of the US. It holds the franchise rights to the Domino’s brand in Australia, New Zealand, Belgium, France, the Netherlands, Japan, Germany, Luxembourg and Denmark, and operates more than 2,600 stores.
The virus outbreak has decimated the dine-in restaurant business.
But, Dominoes is not dine-in. It’s primarily a delivery business.
Though it’s doing better than most restaurants, Domino’s could still face some headwinds.
Some countries have closed Domino’s stores for the short term, France and New Zealand being two examples.
It could still face closures from other countries, should governments force them to. The situation is still fluid for Domino’s.
Let’s run through the recent numbers. The half year numbers posted February were solid.
Sales were up 10.6%. Online sales and delivery sales continued to be the biggest driver to growth up 18.8%. Earnings were up 10% and the company had a record number of store openings.
So let’s bring it up. Here’s the daily chart:
One thing I note about this stock, the DMP share price is still holding the lows from 2019. Not many stocks can claim that at the minute.
So, what now for Domino’s?
The recent low is what I call a key level for this stock. It’s likely to find support there, which it did initially.
Whilst it is, for now, holding the lows from last year, just at the minute there’s nothing really confirmed about where the share price may be heading. Just got to watch it for now.
See if the share price can make a higher bottom from the recent low.
If it can, it might confirm the company is holding up OK during the pandemic.
As always follow the weight of money, to guide your further studies.
Should the lockdown get worse from here, and people try and avoid all contact at the market place, home delivered meals might show increased uptake and growth.
Domino’s could be one for the watchlist. Any company offering meals, with zero contact delivery, might just prosper in such an environment.
It might be a space to watch. The chart will tell us soon enough.
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