Domino's in the dough as growth slows
DOMINO'S Pizza has clung to its full-year profit growth guidance of 15 per cent as consumers in Australia, New Zealand and, increasingly, western Europe chomp through its new pizza offerings and meal deals.
Australia's biggest pizza maker reconfirmed its guidance after it posted an interim net profit of $14.5 million, up 15.7 per cent for the first half. Pre-tax earnings rose 15.5 per cent to $20.2 million.
Same-store sales growth in Australian and New Zealand was up 0.4 per cent and its European operations reported 4 per cent better growth. Overall sales growth was 1.5 per cent.
But as the company swells its store numbers in its three core markets, the business will begin to cycle against the explosive same-store growth seen over the past two years. The slowing momentum this financial year will see Domino's same-store growth settle at sector rates of about 2 to 3 per cent. This is down from earlier guidance of 3 to 5 per cent.
The market reacted negatively to the forecast slowing in growth, with Domino's shares sliding 34.5¢ to $9.95. The stock is below $10 for the first time since November.
Domino's will push ahead with its aggressive store rollout and refurbishment program, with 80 new store openings this year. It cut the ribbon on 31 new stores in the first half. Domino's has also announced it will purchase 15 franchise stores in New South Wales and the ACT.
Chief executive Don Meij defended the dip in sales momentum, saying the food group had recorded a two-year aggregate of 19.6 per cent same-store sales growth, an outstanding result for a retailer.
"It's the reality of a bit of a reset year, but we are still going to deliver our net profit growth and EBIT growth in the region of 15 per cent, so it's not a concern," he said.
"Two to 3 per cent [same-store sales growth] for our business - that's beating population growth, it means we are still growing market share and that doesn't include our new store openings."
The company now has 570 stores in Australia and New Zealand and 364 in Europe. During the first half Domino's opened a record 19 stores in Europe.
In Australia, Domino's continued to roll out new IT applications around smartphones to help boost its slice of the digital market, with more than half its sales in Australia sourced from online orders.
Mr Meij said he was confident of continuing the momentum across its Australian and New Zealand markets despite being faced with increases in labour costs and higher commodity prices.
Domino's earnings per share were up 14.3 per cent to 20.8¢ for the half, with the company declaring an interim dividend of 15.5¢, up 19.2 per cent.