Domino’s Trading Update May Show Signs Of Continued Recovery
Spreadex | Jan 24, 2018 11:28
Can Domino’s continue its recovery following Tuesday’s Q4 trading update?
For a while there 2017 was looking pretty damn dire for Domino’s. Its full year figures in early March alone caused a 13% decline, after it posted a slowdown in its like-for-like sales growth from 4.8% to 3.9% thanks to a poorly-received change to its pizza deals, while in late June the stock dropped 6.5% following a ‘Sell’ rating from Investec, inspired by aggressive discounting by main competitor Pizza Hut. This left Domino’s lurking around the £2.70 across summer, its worst price in around 2 years.
Yet things began to pick up quite dramatically from autumn onwards. On 20th September, Domino’s announced a £15 million share buyback plan that immediately revived the stock’s fortunes, lifting it 13% across the 3 weeks that followed, only for the food retailer to receive another boost in the form of October’s Q3 statement.
There Domino’s revealed some heady numbers, including a 20.8% surge in reported group system sales to £286.4 million. The like-for-like figures were arguably even more impressive: in the UK they jumped 8.1% and in the Republic of Ireland they rose 13.1%, up on the 6.2% and 7.6% posted for the same period the previous year. It celebrated the opening of its 1000th store in the UK, while the region also saw its online sales rise 17.4%.
Just over a week later the company continued to expand, announcing that its German Joint Venture partner, Daytona JV Ltd, had bought Hallo Pizza for €32 million. That move takes Domino’s German stores to somewhere between 300 and 400, making it easily the biggest chain in Germany.
Since then its rise has been a bit more reserved, with it eventually hitting a 10 month high of £3.58 in mid-January. Domino’s Group PLC now sits at a current trading price of £3.46.
If the company is to continue to climb back towards the £3.90 levels seen in early 2017, then investors are going to want to see Domino’s post similar levels of like-for-like growth across the fourth quarter as they managed in Q3. An update on the integration of Hallo Pizzas in Germany will also be welcome.
Domino’s Pizza Group Plc (LON:DOM) has a consensus rating of ‘Hold’ alongside an average target price of £3.35.
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