Domino's CEO Pens a Letter Detailing the Impact of Covid-19 on Its Worldwide Business
We don’t typically provide a business update outside our normal quarterly cadence, but we recognize that these are not normal times. We pride ourselves on being transparent with our stakeholders and we believe this information will be instructive, given the unprecedented impact of Covid-19 on our business and the restaurant industry.
As we continue to navigate this public health crisis, we have decided to provide this preliminary estimate of retail sales, same store sales, and store growth results from the first quarter of 2020. We have also decided to share some period-level detail to provide a view into how our results trended over the quarter. While we hope this is a helpful snapshot of the last 12 weeks, the situation remains fluid and we continue to assess the impact Covid-19 has had, and will have, on our business.
As we manage through this challenge across the globe, I am proud to say that we are prioritizing the health and well-being of our team members, franchisees, and the communities we serve. We take our responsibility seriously for continuing to provide convenient and reliable delivery and carry-out experiences to the communities where those services have been deemed essential during this extraordinary time.
All but a handful of our U.S. stores have remained open and are serving customers. All U.S. supply chain centers are also open and fully operational. January U.S. sales were very similar to the fourth quarter of 2019. Beginning in February and ramping up into March, U.S. sales were affected by many factors, which have varied in magnitude across the cities and towns we serve. Shelter in place directives, pantry loading, university and school closures, event cancellations, and the lack of live televised sports have all had an impact on our business in ways we cannot yet fully quantify.
Across our international business, the unique circumstances in a number of markets have necessitated the temporary closing of stores. We continue to stay in contact with the master franchise companies operating these affected stores and look forward to them reopening as soon as possible. China was our first market to be significantly affected by Covid-19, and we were pleased to see our sales there recover and accelerate in the last few weeks of the first quarter.
Across the globe, Domino’s will remain focused on execution, service, and value as we continue to navigate through the headwinds created by Covid-19. We are carefully managing our balance sheet, cash flow, and all areas of the business to ensure we are doing what we believe will help us best manage through the near term and, as always, position ourselves for long-term success.
We are also committed to supporting our teams and the communities we serve. In our corporate stores and supply chain centers, we have implemented enhanced sick pay policies, and we will provide additional compensation for our hourly team members during this crisis. Our corporate stores and franchisees are also hiring and looking to add more than 10,000 employees across the U.S. Here in the U.S. and around the world, we and our franchisees are donating millions of pizzas to feed the need in our communities.
I remain highly confident in our strategy and optimistic about the opportunity and potential of our business. Our solid, resilient business model and strong financial position will continue to serve us well in these challenging times. I thank our franchisees across the globe for their continued fight and passion in supporting their store team members and customers during this difficult period. I firmly believe that there is no system, no team, and no brand better equipped to face today’s challenges than Domino’s.
Update on international market closures from Covid-19
There are currently 14 international markets closed and 23 international markets with partial store closures, representing approximately 1,400 international stores that are temporarily closed. France, Spain, New Zealand, and Panama represent approximately 900 of these temporary store closures.
Liquidity and use of cash update
Given the market uncertainty arising from Covid-19, subsequent to the end of the first quarter, the company took a precautionary measure and borrowed the remaining availability of $158 million under its outstanding variable funding notes to improve its already strong cash position. These borrowings, along with the company’s estimated current unrestricted cash as of the end of the first quarter, provide the company with more than $300 million in cash on hand to provide enhanced financial flexibility.
Company withdraws fiscal 2020 guidance
Due to the current uncertainty surrounding the global economy and the company’s business operations considering Covid-19, the company is withdrawing its fiscal 2020 guidance measures related to general and administrative expenses, capital expenditures, store food basket pricing, and the impact of foreign currency on royalty revenues.
NOTE: To see the preliminary Q1 results mentioned above, click here.
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