Get your mittens on because the Domino’s Pizza Enterprises Ltd. (ASX: DMP) share price is up 8% following positive results for its recent half-year (HY21).
Domino’s Pizza Enterprises is the largest pizza chain in Australia and the largest franchisee of the Domino’s brand from US-listed Domino’s Pizza Inc. (NYSE: DPZ).
Domino’s Pizza Enterprises has exclusive master franchise rights for the Domino’s brand in Australia, New Zealand, Belgium, France, The Netherlands, Japan, Germany, Denmark and Luxembourg.
Global sales growth spearheaded by Japan and Germany
Domino’s recorded strong global food sales growth as it surged by $260.8 million for HY21 to $1.84 billion, representing a 16.5% boost on the prior corresponding period, HY20 (PCP). The rise in revenue contributed to a bump in Domino’s EBITDA of 23.8% relative to the PCP.
Domino’s CEO and Managing Director, Don Meij highlighted that Japan and Germany exceeded high expectations for heightened order volumes, with additional COVID-specific growth. The numbers are impressive, to say the least.
Japan sales surged by 42.6%, lifting EBIT by 112.3% relative to the PCP. As for Germany, it grew EBIT by 18.2% as a result of effective marketing campaigns, in particular, on the television medium.
The significant growth in sales and consistent level of expenses improved NPAT (net profit after tax) by 18% relative to the PCP.
Management continues to focus on growth
Don recognised that Domino’s has been a beneficiary of COVID-19 and remains optimistic about its future, saying:
“Our view is COVID-19 has brought forward long-term demand for delivered food, ordered online, in all markets. At the same time, carry-out orders remain challenged in most markets, as specific customer segments (including CBD office lunches) have changed their ordering behaviour. Prior to this pandemic affecting our communities, management’s view was the strategy that had delivered our performance over the past decade would deliver growth for the next decade. COVID-19 has not changed this view – high-quality food at an affordable price, served quickly and safely, benefits both our franchisees and our customers – and our recent performance reinforces it.”
Am I hungry for Domino’s shares?
As Don pointed out, Domino’s recipe for success has worked well for a long period of time. It’s a simple formula that can be replicated in the right markets, especially those who value convenient cheap food.
So, if Domino’s continues to execute well in the right geographies, it will likely do well over the long-term. Investors should consider monitoring Domino’s operating margins as it scales because operating expenses rise as more stores are rolled out. It’s similar to eating pizza and the law of diminishing returns. Once I’m bloated, any extra slice of pizza will provide less satisfaction.
If you’re hungry for Domino’s shares, William Donnan provides a deeper analysis in his article, Are Domino’s Pizza (ASX:DMP) shares a buy?
If you feel bloated and would rather look at other ASX share ideas, I suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.
