Domino's Pizza Enterprises Limited

DMP Details

Domino’s team members to stay on Fast Food Industry Award: Domino's Pizza Enterprises Limited (ASX: DMP) recently announced about Domino’s employees to stay on fast food industry award, rather than continuing to pursue approval of a new Enterprise Bargaining Agreement (EBA). This will support certainty and stability to team members and franchisees with labour costs. This includes paying employees in weekend and public holiday penalty rates. The management expects that this strategic initiative will increase the labor cost as a percentage of sales of the company. It is expected that operating margin of the company could be impacted by this initiative for full year. But, looking at long term prospective, the group might start focusing on great product mix with quality services and value to the customers. Henceforth, the company forecasted total network sales of around $1,179.6 million in 2HFY18.


Total Network Sales (Source: Company Reports)
 
Meanwhile, Pinnacle Investment Management Group Limited and Pinnacle Investment Management Limited became the substantial holder of the Group since 09 March 2018 by holding 10,616,505 securities with 12.20 per cent of the voting power. Recently, the group informed to market about cancellation of shares after buy-back. DMP had otherwise reported NPAT growth of over 17% to $58.7m for the half-year ended 31 December 2017 while revenue from ordinary activities were $567.6m, up 5.2% from last year. This led the diluted EPS to be 66.3 cents compared to 56.6 cents of last year. While ANZ EBITDA and revenue increased by 7.6% and 15.8%, Japanese EBITDA and revenue fell by 24.3% and 8.8% respectively, at the back of weak Christmas trading period with promotions failing to translate into sales growth, and a lower number of corporate stores. DMP stock was down 9% in the last one month as on April 19, 2018 and is trading at nearly high PE levels among its peer group. We give an “Expensive” recommendation on the stock at the current price of $ 39.160, and will wait for some price dip and surety that the franchisee model or employee fee related shortcomings are at bay.

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