Domino’s Share Price Drops Despite Increase in Full-Year Profit

Domino Pizza Enterprises Ltd [ASX:DMP] share price fell by 12.72% shortly after opening this morning, following the announcement of the pizza chains full-year results for 2018 and its guidance for 2019.

Despite an increase in profit for 2018 due to higher sales, investors are disappointed with the 2019 forecast.

Domino’s shares are currently trading at $45.75 — down nearly 17% from its 52-week high.

Why is Domino’s share price sinking despite positive results for FY18?

Domino’s reported a full-year profit for 2018 of $136.2 million, 15% higher than the previous year. And an increase in its final dividend payment of 15.5%, meaning shareholders will be paid 49.7 cents per share (75% franked).

The fast-food chains sales also rose 11.7% to $2.59 billion and total revenue increased by 7% to $1.17 billion.

Investors were left disappointed as the results fell short of its own 2018 forecast which was estimated to be around $138 million, with a 20% growth from the previous year.

Domino’s states that the less-than-expected results were a result of Australian sales underperformance, which were affected by the recent labour force scandal involving Domino’s employees and the Fair Work Commission. This, along with lower than expected sales in France from increased food costs, proved costly to Domino’s falling share price.

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How does 2019 financial year look for Domino’s share price?

Domino’s is estimating to open between 225–250 new stores over the next year, with an estimated same store sales growth for all stores to be within 3–6%.

The fast food chain is expecting earnings before interest and tax to total $227–247 million. With capital expenditure of between $60­–70 million.

Domino’s CEO and Managing Director Don Meij stated that the company is focused on investing in technology, to improve efficiency and better the ordering experience for customers.

Globally, we believe ongoing growth over the longer term is achievable and expect to grow our business, and our share of the pizza and wider fast food markets, with compounding growth in the range of 3-6%3 — higher than our competitors.

We believe this is achievable given the growth we’ve achieved in the Europe market already — 230% in the past three years alone.

As stated by Mr Meji, despite tough trading conditions due to poor publicity and its expansion into the European and Japanese markets, Domino’s strong store metrics and an increase in profit for 2018 demonstrate resilience and reinforce confidence in the pizza chain.

Even if the share price falls further, Domino’s stores aren’t going anywhere. There is definitely potential for them to make a comeback, let’s just hope they continue to operate ethically and avoid any more negative publicity.


Matt Hibbard

For Markets & Money

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While many investors chase quick fire gains, Matt takes a different view. He is focused on two very clear goals. First: How to generate reliable and consistent income in a low-interest rate world. And second, how you can invest today to build wealth over the next 10–15 years. Matt researches income investments. You can find more of Matt’s work over at Total Income, where he is hunting down the next generation of dividend-paying companies for the future. He is also the editor of Options Trader, where he uses basic options strategies to generate additional streams of income beyond the regular dividend payments. Having worked for himself and with global firms for almost three decades, Matt has traded nearly every asset in existence. But now he is on a very different mission — to help investors generate income irrespective of what the market is doing. It’s about getting companies to pay you a steady, stable income, with minimal stress and the least risk possible. Matt doesn’t believe you have the luxury of being a bull or a bear in the market right now. You have to earn an income from it, regardless of whether stocks are going up or down. By getting the financial markets to pay you an income, you can get to focus on more important things than just money.

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