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Domino's (DMP) - Brisbane strategy day

Dominance may take time

17 April 2024

Domino’s strategy day addressing its Australia/NZ and Asia segments reinforced its long-term ambition for growth. While Australia/NZ is performing well, Japan has challenges because too many stores have been opened too quickly. The issue of franchisee profitability was raised and structural challenges in Japan, Taiwan and France acknowledged by management. As a result, investors should brace for lower store growth including a lowering of the medium-term targets. Store growth of 4%-6% is more realistic than the current 7%-9% target.

Domino's (DMP) - 1H24 result insights

Stabilisation is a start

23 February 2024

Domino’s 1H24 result revealed mixed information. Same store sales growth momentum has improved early in 2H24e and is an encouraging sign. However, the underlying cost growth for the business looks elevated and franchisee profitability is well below levels that will reignite store openings. While earnings may have troughed, we expect an acceleration in store growth is two years away given such low franchisee profitability.

Domino's (DMP) - Awaiting answers

Questions that need answers

14 February 2024

Domino’s company needs to clarify key issues in our view before a positive stance can be taken. We are looking for answers on whether Japan needs to pause store rollouts, the trajectory of sales in Europe and discounting intensity in Australia. There is a wide range of potential outcomes, ranging from whether Domino’s can quickly reignite store growth and pizza volumes or, more likely, store rollout struggles for another three years. Domino’s will release results on 21 February 2024.

Domino's Pizza (DMP) AGM 2023 trading update

Joining the second-half club

03 November 2023

Domino’s trading update revealed that sales trends have softened in Europe and remain negative in Japan. Sales are solid in Australia/NZ. The company emphasised earnings are recovering, but the qualifier is that 1H24e EBIT is likely to be down year-on-year. Domino’s is focused on improving franchisee profitability.

Domino's Pizza (DMP) FY23 results analysis

Cost outs to drive earnings

25 August 2023

Domino’s FY23 EBIT of $202 million is likely a trough given the company’s cost saving program. While pleasing, the lingering concern we have is focused on is weak franchisee profitability, which will limit new store openings. Moreover, Domino’s balance sheet may avoid any major capital raising, but it is also constraining support for franchisees when compared with offshore peers.

Domino's Pizza (DMP) June 2023 trading update

Trading update shows further deterioration

16 June 2023

Domino’s trading update revealed the company is yet to find a way to raise prices without damaging volumes. EBIT is on track for a 21% fall to about $92 million in 2H23e. We estimate FY23e EBIT at $206 million rising to $223 million in FY24e given announced cost savings. The balance sheet position is particularly tight at the end of calendar 2023, but we see a lower dividend payout as most likely to avoid a capital raising. The earnings trough is in sight. However, the PE ratio is still high and the company will need to demonstrate franchisee profitability can improve in order for the share price to rise from here.

Domino's Pizza (DMP) margin pressure likely

Company playing the long game on store rollout

08 June 2022

Domino’s “rebasing” of sales is only one of the challenges facing the company over the next two years in our view. The company and franchisees face higher costs and store rollout could slow. The cost pressures that have built in the past six months are likely to lead to some margin pain for Domino’s as it preferences store rollout and market share growth.

Domino's Pizza (DMP) 1H22 result

A slice off sales

24 February 2022

Domino’s reported a 6% drop in EBIT despite 11% sales growth in 1H22. The company saw a decline in SSSg for Japan and some disruptions in Australia/NZ. Domino’s noted that Japan sales are rebasing lower, which will lead to lower sales growth through to September 2022 in our view. Our key observation from 1H22 result was cost growth running ahead of sales growth. Such growth was outsized and if it continues will dampen margins across FY22e.

Domino's Pizza (DMP) A more gradual normalisation in sales

Delaying the inevitable

21 January 2022

We expect a more mild slowdown in Domino’s same store sales growth (SSSg) in key markets as higher COVID-19 cases are likely to lead to more sales of pizza. Our analysis of data from restaurant bookings in Japan has shown a drop recently, which is likely to lead to more home delivered food. Europe is also likely to have decent SSSg in 1H22e. In the report, we address  Domino’s Japan’s potential same store sales path; Domino’s Europe’s exposure to rising COVID-19 cases; and The upside and downside risks from here.

Domino's Pizza (DMP) AGM trading update

The slowdown begins

04 November 2021

Domino’s AGM trading update has ignited the debate about the extent to which the company has been a beneficiary of COVID-19 lockdowns. Japan is likely seeing -25% same store sales in October. Sales declines in Japan are likely for another 12 months and Europe may have a very soft 2H22e as well.  Domino’s is a well-run business with good long-term growth, but its sales and earnings will reset as lockdowns ease.

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