Woolworths reported an impressive 6.6% comparable sales growth in Australian Food in 3Q23. While Woolworths sales growth is good there are some challenges. Its superior growth is more a function of eCommerce and new stores, which has additional costs. Moreover, growth rates are likely to slow as food inflation fades over the next 12 months. We expect good earnings growth in FY23e, but growth is likely to slow next year.

We initiate coverage of Domino’s Pizza Enterprises. The company is the master franchisee for Australia, New Zealand, Japan Taiwan, France, Germany, the Netherlands and Benelux. The company has recently upgraded its long-term growth targets, but also the long-term opex and capex outlook. The upside risks are faster store openings, better margins and additional territories such as Korea. The downside risks are COVID-19 unwind of sales, more capex and online competition from delivery aggregators.