Domino’s Pizza Enterprises Limited (ASX:DMP)

Focus on Same-store sales Growth in order to achieve its guidance - The Group has reaffirmed its full year guidance that was provided last year. However, it is expected that labour costs will be increased due to the implementation of strategic initiatives. Meanwhile, DMP continues to focus on providing great products, service and value to its customers and by investing in its people. As per the recent Domino’s GPS Driver Tracker poll, the group flagged that Origin is the busiest night of the year for the Company, with 65 per cent per cent of customers ranking pizza as their go-to “meal of choice” for game night – ahead of BBQs, burgers, and fish and chips. Further, DMP is considered to have good technology platform while its efforts across other geographies like Europe are on track. European network sales increased €33.4m to €298.0m for H1 while Japan sales increased ¥289.3m to ¥21,037.9m. The group now expects NPAT growth guidance to be in the region of +20% with better same store sales, while FY18 Guidance on new store openings is between 310-330.

While the stock has witnessed its short interest rise week-on-week to over 15 per cent; Commonwealth Bank of Australia changed its substantial holding from 5.33 per cent to 6.17 per cent. The Group issued 239 fully paid ordinary shares at a consideration of $42.52 each share and these were issued under the terms of the Domino's Pizza Enterprises Limited Employee Share Acquisition Plan. The Group announced that Australian employees will remain on the Fast Food Industry Award (Modern Award) and will not continue to pursue approval of a new Enterprise Bargaining Agreement. Modern Industry provides certainty and stability to team members and franchisees, and through this, labour costs will be within its forecasting limit.


ANZ SSS Growth Trend (Source: Company Reports)

As per the trading scenario, the Group has been seen to miss its guidance while delivering its 1HFY18 NPAT growth and after this the stock prices fell by 6 per cent but Company resumed its buy-back activity and during this Don Meij (Chief Executive) sold the $18.6 million worth of his personal shares. Now after not achieving its guidance, the Group can’t afford to miss its guidance of achieving NPAT growth that has been reiterated during its course of trading. The Company focuses on same-store sales growth (SSS). It was noted that in ANZ, SSS Growth was just 3.7 per cent in 1HFY18 and whereas in the first five weeks of 2HFY18, it was just 5.9 per cent and this disappointed the market which led the share prices slipped.

On the other hand, it is expected that the demand for Domino’s Pizza will increase in the coming weeks due to the FIFA World Cup which will lead the share price to rise. It is to be seen whether the group can meet its guidance now. The stock climbed up by 24.94 per cent in last one month (as at June 08, 2018). However, given the price run-up and few shortcomings, it might be better to wait and watch out.

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