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Domino’s delivers

Domino’s Pizza Enterprises Limited (ASX: DMP) has today announced a $26.9m profit for the 2012 financial year, a 25.7% jump over last year. Same stores sales were up 6.5%, and 62 new stores were added, including 38 stores in Europe. Domino’s now has 908 stores and plans to open its 1000th group store by December 2013.

The company attributed the results to new products and a significant rise in online and mobile sales, launching ordering through Facebook as well as an online catering system in Australia and New Zealand. The company plans to launch an iPad app later this year.

The full year dividend was 27.1 cents, fully franked, putting the stock on a dividend yield of under 3%, based on the current price of around $9.68.

Investors liked the news with the shares rising 2.9% in midday trading.

Fast food sales tend to hold up in tough times, and it will be interesting to see the results of Domino’s other listed competitors when they report.

Retail Food Group (ASX: RFG), the franchise owner and operator of Donut King, Michel’s Patisserie, Brumby’s Bakeries amongst others, recently moved into pizza when it acquired around 100 Pizza Capers outlets, located predominantly in Queensland, and is expected to report its results later this week.

Other competitors include Patties Foods Limited (ASX: PFL) and Collins Foods Limited (ASX: CKF), which operates 121 KFC stores throughout Queensland and 27 Sizzler restaurants around Australia. Collins has been struggling to deal with increased competition from other fast food outlets, and it will be interesting to see if they have grown sales this financial year.

Meanwhile, Domino’s expects to grow net profit in the 2013 financial year by around 15% and open an additional 70 to 80 stores. The company is targeting same store sales growth of between 3 and 5%.

The Foolish bottom line

Currently trading on a P/E ratio of around 25, it appears that investors have much higher expectations of Domino’s than management. With net cash of $26 million, a high return on equity (23%) and a solid outlook, it’s a company I’d like to own – just not at current prices.

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More reading

Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.  The Motley Fool ‘s purpose is to help the world invest, better.  Take Stock  is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  Click here now  to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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