Shares in Domino’s Pizza (DMP), the rapidly expanding fast food group, fell more than 6% yesterday as investors turned their noses up at what was a solid trading update from the company at the AGM in Brisbane late Tuesday.
The shares fell 6.1% to $26.62 yesterday, after a fall of 2.4% on Tuesday.
The 8% plus drop is a thumbs down from investors who didn’t like the news that it now expects underlying profit to rise by 25% to $57 million, up from its earlier forecast of 20%.
CEO Don Meij said in the update that a strong lift in same store sales growth across the business led to the improved forecast.
Same store sales have grown 10.7% in Australia and New Zealand since the beginning of July, and 7.5% in Europe.
Same store sales in Japan, a new market for Domino’s, grew 1.2%, in line with the company’s expectations.
This growth compares to that reported back in August for the 2013-14 financial year when it said it had same store sales across the group of 5.8% (including 6.3% in Australia and New Zealand), significantly improved same store sales in the second half in Europe of 4.6%, and impressive 10.7% growth in Japan.
“While we remain cautious with eight months of trading ahead, we are confident of continuing the current momentum," Mr Meij told the company’s annual general meeting.
DMP YTD – High expectations hurt Domino’s
A major revamp of stores, improved online ordering systems and marketing efforts, such as allowing customers to create their own pizza from the Domino’s menu – have helped boost sales.
"We are putting brighter fresher stores on the ground. In Australia, we re-imaged more than 100 stores in the past 12 months,” Mr Meij said.
“They’re more engaging and enticing; you can see us make the dough and pizzas."
He also confirmed plans to open up to 185 new stores in all of its six markets in the current financial year (it had 1,368 existing stores as of Tuesday).
Due to the upgrade in guidance, DPM also confirmed an uplift in Net Capex to $60m-$70m to assist with future growth plans, according to Mr Meij.
The company also plans to roll out GPS tracking systems for pizza deliveries across Australia and New Zealand by June 30 next year and the company said it had just appointed a chief digital officer.
