Domino’s carves more from online
BRISBANE-based pizza chain Domino’s hopes its latest fast-food plan will deliver a 20 per cent boost in profit this year.
Domino’s announced a better-than-expected 40 per cent spike in net profit to $64 million yesterday.
The result smashed the company’s guidance of a 32.5 per cent profit jump outlined in February.
Tech-savvy chief executive Don Meij used yesterday’s profit announcement to unveil plans for a “worldfirst” 15 to 20-minute order guarantee where customers can pay a premium to have their pizzas delivered on time.
Mr Meij said the recruitment frenzy at the start of the year and the newly launched driver tracker app would help ensure the success of the initiative.
A new website is also tipped to help drive online sales which grew 26 per cent last year, making up more than 60 per cent of all orders.
The website comes on the back of the ongoing successful Pizza Mogul campaign which allows customers to create and sell pizzas.
Domino’s has a history of under-promising and overdelivering on its market guidance and has been one of the ASX 200’s stellar performers, with its shares more than doubling in the past year.
Despite yesterday’s figures investors initially baled out of the stock, sending shares more than 9 per cent lower to $37.43. The stock, which listed in 2005 at about $2.05, recovered to close just 8 down for the day at $41.07.
IG market strategist Evan Lucas said the stock remained expensive.
“The numbers are good, you can’t deny that, but the PE-ratio (price-earnings ratio) at 56 times is way, way, way too high to justify what is a very good result,” he said.
Morningstar Equity analyst Farina Parsons said with record expansion plans, acquisitions and new tech products to be rolled out, it was likely to be another case of Domino’s “under-promising but over-delivering” in the year ahead.
“The huge benefits they’re going to get from technology and acquisition in the next 12 months aren’t in the guidance,” she said.
“They haven’t yet factored in the benefits from those measures, which could be enormously positive.
“They’re little things but they make a big difference.”
Domino’s plans to roll out a record number of stores in Australia and New Zealand – 180 to 200 this coming year, and will increase its stores from 750 to 800 in Japan.
Domino’s has flagged 1100 new stores – about the number it has opened in the past decade – in the next five years.
Mr Meij, who started with the company as a delivery driver 28 years ago, was confident the expansion would help boost revenue, and innovation would continue to lead growth.
“One of the great things of our business is the size of the momentum,” he said.
“Our stores are beyond capacity. We desperately need more stores to get closer to the customer.”