Domino's Pizza Share Discussion Threads

[philanderer] 23/1/2013 14:15

Downtrend definitely resumed today, seller(s ) about..... nearly 500k traded so far.

[philanderer] 22/1/2013 12:11

'German investor confidence surges to pre-crisis high'

[philanderer] 21/1/2013 09:32

Tricky one....more pizzas eaten at home - if they can get delivered ;-)

[philanderer] 18/1/2013 14:30

IC 'sell' is as good a 'buy' recommendation there is ;-)

Agree with M1das, Germany is the key here.

[m1das_touch] 18/1/2013 09:54

Personally I'd be cautious about shorting at these levels, particularly as despite the high rating, the share-price is still in a strong long-term upward trend.

IC's record on sell tips is not great recently - for example on 20/12/12 they advised selling Easyjet at 744p (again, a share price in a very strong uptrend) and it's since risen to 875p.

I'm a long-term holder in Dominos, having re-entered at an average price of 442p. I think the potential of the German market isn't fully appreciated yet. Plus the operational gearing should mean really good profit and dividend growth when the full year results are announced.

[huttonr] 18/1/2013 07:33

Investors Chronicle - sell advice (apologies for the formatting problems)

Bull points
•Long-term potential in Germany
•Producing growth others would envy


Bear points
•Rating not adjusted for slowing growth
•Germany expected to be loss-making for three years
•Headwinds in 2013
•In danger of 'cannibalising' itself

Sales growth of 12.7 per cent from a UK-focused consumer group sounds impressive, even when the comparison is a 53-week trading period in 2012 juxtaposed with 52 weeks in 2011. Indeed, the group that reported that number, Domino's Pizza (DOM) is impressive, but it may no longer be as good as its share rating suggests. Its growth rates are slowing (see table), but its share rating has not cottoned on. That's illustrated in the chart. The shares' price-earnings ratio has stayed high, while earnings growth has tailed off, leaving its so-called PEG factor (PE ratio divided by growth rate) looking worryingly high.

Domino's Pizza's slowing growth rate





Year to 31 Dec

System sales

Like-for-like

Diluted EPS pre-exceptionals

Dividend




2005

15.1%

7.1%

22.1%

38.1%



2006

19.7%

9.7%

31.9%

35.2%



2007

23.4%

14.7%

39.1%

43.8%



2008

18.4%

10.0%

28.6%

34.1%



2009

16.0%

8.4%

26.0%

31.4%



2010

19.3%

11.9%

24.2%

31.6%



2011

9.3%

3.0%

14.9%

20.6%



2012*

12.7%

-

10.5%

15.7%




2013*

-

-

14.9%

14.9%



Source: Domino's Pizza & N+1 Singer

*N+1 Singer underlying forecasts



Source: Bloomberg

The growth story that has been the foundation of the group's success is built on three planks: sales growth from existing stores; new store openings; and operational gearing (whereby higher sales lead to much higher profits because most costs are fixed). Yet there are reasons to expect slower progress on all three fronts in the coming year and possibly beyond. In fact, the figures in the 'slowing growth rates' table indicate that such a scenario has taken hold.

Like-for-like sales growth at Domino's has been powered by savvy marketing and online sales. Last year, 56 per cent of total sales were made over the internet and product innovations, such as a gluten-free pizza range, should help performance in 2013. However, there is only so much Domino's and its franchisees can expect to get from each store. In 2012, even with the help of an extra week's trading, wet weather and major sports events, which tend to keep people at home ordering pizzas, like-for-like sales only increased 5 per cent in the UK. (True, some eating-out companies would be thrilled with that, but we're talking about Domino's here.) And there was a small fall in like-for-likes in the Republic of Ireland.





Domino's Pizza (DOM)




ORD PRICE:

520p

MARKET VALUE:

£851m



TOUCH:

520-521p

12-MONTH HIGH:

567p

LOW: 417p



DIVIDEND YIELD:

3.2%

PE RATIO:

21




NET ASSET VALUE:

38p

NET DEBT:

33%







Year to 31 Dec

Turnover (£m)

Pre-tax profit (£m)

Earnings per share (p)

Dividend per share (p)




2009

155

41.0

21.5

7.8



2010

188

35.2

15.4

10.2



2011

210

38.8

16.7

12.3



2012*

233

46.0

21.4

14.2



2013*

260

52.9

24.5

16.4



% change

+12

+15

+14

+15





Normal market size: 5,000

Matched bargain trading

Beta: 0.8

*N+1 Singer forecasts (earnings not comparable with historic figures)



This year, not only will Domino's be back to a 52-week reporting period, and lack the tailwind of big sporting events, but consumers may have a tougher year. According to Longview Economics, a consultant, 2012 saw real UK disposable incomes rise 1.5 per cent, which was the biggest improvement since 2005. But forecasts are for no growth this year. Meanwhile, stores in the Republic of Ireland are experiencing falling like-for-like sales, with little sign of respite.

In addition, broker Canaccord Genuity thinks Domino's 775-store network in the UK and Ireland is so comprehensive that half of its new openings this year will infringe on areas already covered. In other words, there is a limit to how long Domino's can add outlets at the rate of about 60 a year before the signs of 'cannibalisation' are obvious.

The group also faces a squeeze on profit margins. Usually, its margins widen because sales rise much faster than its costs. But slower growth reverses that effect. In addition, food-price inflation may be 2-3 per cent compared with about 1 per cent last year. The hope is that most cost increases can be passed on to franchisees; and that in Germany losses may ease as Domino's adds to its network of 18 stores.

Certainly, Germany offers long-term potential and signs of like-for-like sales growth are encouraging. Fans of Domino's in the City hope that Germany can take up the baton as the UK falters. Broker N+1 Singer reckons that Germany could support over 2,000 outlets. We can see the logic, but the German operation is in its infancy and it will be some years before it is significant. Broker Canaccord forecasts Germany will be loss-making for the next three years.


SHARE TIP SUMMARY:

With the possibility of three years of losses in Germany, we think the share rating is in danger of slipping from the current level, based on consensus estimates of 15 per cent EPS growth. Also, given the headwinds the group faces this year, forecasts may well be cut as the year develops. True, there may be some hype when Domino's announces 2012's results next month but, on a 12-month view, the shares are a sell.

[philanderer] 17/1/2013 09:11

Another one for Huddersfield

'Domino's pizza chain looks to Waterloo for new takeaway venture'

Read more: Examiner

[philanderer] 14/1/2013 12:06

Well, a bit of interest this morning.. 120k traded so far.

[philanderer] 13/1/2013 20:36

AA29, totally agree, it`s a matter of patience and waiting for Germany progress news now. So the share price may be a bit dull for a while.

[huttonr] 13/1/2013 17:07

AA29
I can't disagree, and certainly the German expansion will make a big difference but prob not until 2014 (?). However, I was also encouraged by the 20% rise in system sales over the last quarter - possibly the web effect of the national distribution winning out over local traders? Anyway - not long before we see the real 2012 figures.

[aa29] 13/1/2013 16:05

HuttonR

I agree with your logic, revenue should increase at a faster rate than system sales and I can see revenue of c£245m against expected £233m.

But whilst results should be good, I think we're in one of Domino's trading range (share price) phases with brokers appearing to be scaling down price targets at present and the likes of Nigel Wray quite possibly having another chunk of shares to offload into the market after results have been announced.

We may need Germany to start accelerating group growth before a next leg up in the share price.

[huttonr] 13/1/2013 11:05

Sparkymoc

I think you may still have a wrong appreciation of the significance of the system sales.
If you look at last years results:
systems sales £530M increase of 9.3%
adjusted profit £42M increase of 10.9%
this year
systems sales £598M increase of 12.7%
at this stage we do not know the expected profit.. but extrapolating from last year - ie 12.7% sales increase giving about 14% profit increase
adjusted profit £48M increase of 14% (obviously questions on extra costs for Germany etc but looks about this)

The current broker estimates are £46M for this year so it looks as if we will comfortably meet and probably beat expectations. Hence the share price looks more likely to rise than fall.

[sparkymoc] 10/1/2013 22:35

Thanks guys.

I read from that then the system sales are not as relevant as the total group sales.

[philanderer] 10/1/2013 11:44

10th jan Credit Suisse neutral TP 525p

retains

[philanderer] 09/1/2013 23:00

:-D

"Zero carbon pizza delivery added to Domino's menu"

Company slices running costs by adding two Renault Twizy quadricycles to Swindon delivery fleet

....The Twizys are also ideal for late night deliveries given their near silent running, according to James Swift, franchisee of Domino's in Swindon.

"We are extremely happy with our Twizys as for us they are the perfect runaround for delivering our piping hot pizzas quickly, responsibly and most importantly with minimal running costs," he said in a statement. "They are quite a head-turner too, so it creates a great buzz for us as we like to do things differently."

A company spokeswoman told BusinessGreen Twizys are also being used by Dominos outlets in parts of Scotland and in some of its German stores, adding that the electric car's popularity was growing among franchisees.

photo and article:

[philanderer] 09/1/2013 13:47

9th january Goldman Sachs 'buy' - retains.

sparkymoc, Hurronr is spot on....... bit more detail here:

[huttonr] 09/1/2013 09:56

sparkymoc - I think the answer is:

System sales - total sales by all stores - remember that these are largely franchisee stores
Total sales as per Company P&L - sales of ingredients to franchisees + royalties, etc

Difference is what the franchisees keep - their profit, wages, costs, etc

[philanderer] 09/1/2013 09:14

9th january HB Markets downgrades to hold from buy

[sparkymoc] 08/1/2013 22:58

Hi

What is the 'system' sales they quote in their trading statement mean and what is the difference between 'system' sales and total sales, excuse my ignorance!

Thanks in advance

[philanderer] 08/1/2013 16:22

8th january Oriel Securities add

retains