Domino's loses sheen as sales growth slows

DOMINO'S PIZZA has stuck to its full-year profit growth guidance of 15 per cent as consumers across Australia, New Zealand and, increasingly, western Europe chomp through its new pizza offerings and value 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 across 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 opening 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 buy 15 franchise stores in NSW and the ACT.

Its 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.

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, and has adopted an accelerated store opening plan for the second half in France, Belgium and the Netherlands.

In Australia it continued to introduce new IT applications for smartphones to help boost its slice of the digital market, with more than half its sales sourced from online orders.

Mr Meij said he was confident of continuing the momentum across its Australian and New Zealand markets despite increases in labour costs and higher commodity prices.

Domino's earnings per share was 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.