Domino’s Fails To Deliver

By Glenn Dyer | More Articles by Glenn Dyer

Investor unhappiness with the performance of Domino’s Pizza returned to the ASX yesterday when the company missed sales and profit guidance and saw the shares lose more than 12% of their value at one stage.

Domino’s shares ended the day down more than 6% at $49 after hitting a session low of $45.52.

While Domino’s Pizza boosted its profit by 15% in 2017-18, falling short of its guidance of “in the region of 20%” growth after missing its sales targets.

The pizza chain on Tuesday reported normalised net profit after tax of $136.2 million for the year to July 1, up from $118.5 million a year earlier, thanks to an almost 12% rise in total sales.

Domino’s added almost six stores a week to its network during the year, opening 145 new stores and buying 163 stores from other brands.

Domino’s also reaffirmed its outlook to almost double its global store numbers by 2025, forecasting Australian stores to grow from 819 to 1200, European stores to grow from 1054 to 2600 and Japanese stores to grow from 520 to 850.

Same-store sales, which removes the impact of new stores, slowed during the year in its core Australia network slowed noticeably to just 4.5% from 13.6% in 2016-17 and well, and short of its guidance of between 6% and 8%.

The company gave guidance for earnings before interest and tax of between $227 million and $247 million in 2019. Brokers said that was lower than previous forecasts and looked like an earnings downgrade for the current financial year.

Sales at its network of stores in Europe grew at 5.7%, up from 2.8% but also short of guidance (6% to 8%). Japan grew sales 0.9%, compared to negative 0.6% last year.

“We delivered positive growth in all markets but after consecutive years of significant and compounding growth, our bar for success is even higher," Domino’s chief executive Don Meij said in a statement.

“The results of this year reinforce our confidence in our business; strong store metrics with increasing profitability mean internal franchisees are opening new stores and building their businesses."

But his positivity was ignored by investors (not helping was the large short position on Domino’s shares) who sold off the shares from the start of trading. The result was released before the market opened.

Revenue rose 7.5% to $1.15 billion, which was also short of the market’s expectations of $1.2 billion.

Total dividend for the year was lifted to 107.8 cents a share from 93.3 cents for 2016-17 with a final of 49.7 cents a share (44.9 cents interim).

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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