The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price is in focus after reporting a challenged FY24 result.
FY24 result
Here are some of the main highlights from the 12 months to June 2024:
- Network sales increased 4.6% to $4.19 billion
- Same store sales growth of 1.5%
- Network store growth of 0.3% to 3,795
- EBITDA growth of 4.5% to $362.7 million
- EBIT growth of 3% to $207.7 million
- Net profit after tax (NPAT) declined 1.9% to $120.4 million
- Annual dividend per share declined 3.7% to $1.059
Domino’s said that average franchised store profitability in FY24 improved by 67% to $97,400, from growing same store sales, and a reduction in store operating costs. But, that’s still lower than FY22’s $113,500 figure.
In FY24, same store sales growth was 7.9% in ANZ, 0.3% in Europe and negative 7.2% in Asia.
Turning to regional EBIT, ANZ EBIT rose 10.4% to $124.1 million, Europe EBIT rose 33.8% to $70.7 million and Asia EBIT dropped 28.7% to $42.9 million.
The company said ANZ and Germany led the way, growing its share of the category through the launch of “inspired new products”, which flows through to improved unit economics.
Domino’s said the restructuring program delivered $50.2 million in savings to the network during FY24. The company said it invested more than a third of the savings into the network, reducing costs and added marketing.
The company also said it reduced its net debt by $148.6 million to $690.1 million, reducing the leverage of the business.
Domino’s said that ongoing store unit economics improvements are required to return to store network growth.
FY25 trading update
The company said FY25 sales are “slightly below expectations, largely due to timing issues as some larger markets compound highly successful limited time promotional campaigns or one-off events.”
ANZ “continues to perform positively” with higher same store sales, while European sales are affected by German performance. Benelux countries (which refers to Belgium, the Netherlands and Luxembourg) have seen positive same store sales, though France “still requires more traction with its turnaround program” including an increase in marketing spending.
In Asia, Japan sales are negative, though there’s more profitable orders through fewer discounts. Malaysian sales “continue to be affected by geopolitical issues”. Singapore and Taiwan are achieved positive same store sales.
Outlook for the Domino’s share price
Store openings in FY25 will be flat to slightly positive, with openings offset by some targeted closures to improve profitability in France and Japan.
The company believes the long-term target of 7,100 stores – around 1.9x the current network – remains appropriate, due to the potential in large markets such as Germany. However, store growth of 7% to 9% will not be achieved in FY25 or FY26.
The Domino’s share price has fallen heavily over the past few years. If profitability can recovery, it may be an interesting idea at this beaten-down price (which could go even lower). It’s not the sort of investment I’d want to make, but some brave investors may see a contrarian opportunity.
