DOMINO’S SHARES GO COLD AS SALES SLOW
DOMINO’S Pizza shares have fallen 6 per cent after the company lowered its sales growth forecast for Australia and New Zealand.
The fast food retailer expects full- year same store sales growth at its local stores to be in the range of 6 to 8 per cent, down from a previous forecast of 7 to 9 per cent.
Chief executive Don Meij said same store sales growth in Australia and NZ was softer than expected in the half year to December, falling from 17.4 per cent a year ago to 3.7 per cent.
Domino’s still achieved a 17 per cent increase in half year net profit to $ 58.7 million, as overall sales rose 4 per cent, on a same store sales basis. Mr Meij said sales in Australia and New Zealand a year ago were boosted by the company’s largest menu change in eight years.
“Let me make it clear that we are still a high growth company and we will be a high growth company for a number of years to come,” he said.
Full year sales forecasts for Domino’s operations in Europe and Japan remain unchanged.
After adjusting for costs of a share buyback, first half year profit growth was 7 per cent, and sales were weaker than expected in Japan due to a poorly received menu change.
But Domino’s has maintained its forecast of full- year net profit growth of around 20 per cent.
Analysts at Citi said the company faced a challenging second half to meet its forecast, given it had downgraded its sales growth guidance in its biggest market.
“Domino’s continues to execute well, but with so many geographies, it is challenging to deliver fast growth across all segments at the same time,” the Citi analysts said in a note.
Shares in Domino’s dropped $ 3.00, or 6.1 per cent, to $ 46.50.
Domino’s said same store sales in Australia and New Zealand rose 5.9 per cent in the first five weeks of the second half of the financial year.
Mr Meij said franchisees’ profits were expected to be higher than in the prior year despite increased labour costs due to a new enterprise bargaining agreement, which includes weekend and late night penalty rates. The impact of the higher wages is expected to be below 2 per cent of franchisee sales, on average, slightly below the company’s original forecast.