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Domino’s share price jumps 8% on strong first half result

In morning trade the Domino’s Pizza Enterprises Ltd (ASX: DMP) share price has jumped higher following the release of its half year results.

At the time of writing the pizza chain operator’s shares are up 8% to a 52-week high of $62.00.

What happened in the first half?

During the first half of FY 2020, Domino’s delivered a 10.6% increase in global food sales to $1.58 billion. This was driven by the opening of 85 new stores and a solid 4.1% increase in same store sales. Over the period, the company’s online sales grew 18.8% to $1.11 billion. This means they now represent over 70% of total sales.

The company’s EBITDA grew 10% over the prior corresponding period to $151 million. This was driven largely by strong earnings growth in Japan and particularly Europe. The Europe segment posted 9.4% increase in sales, a 5% rise in same store sales, and a 15.6% increase in EBITDA to €29.4 million.  

Over in Japan, the company recorded a 12.2% lift in sales, 6.1% growth in same store sales, and a 10.6% jump in EBITDA to ¥2.8 billion. Combined with its growth in Europe, this has helped drive International EBITDA to $86.2 million, which represents 57.1% of total EBITDA. The Australia/New Zealand segment wasn’t quite as strong. It delivered a 3.5% increase in sales, a 3% lift in same store sales, and a 1.7% increase in EBITDA to $71.4 million.

Domino’s reported a 6% half on half lift in its capital expenditures to $49.1 million. This is within its medium-term outlook of $60 million to $100 million per annum. Management believes this will be money well spent and expects a solid return on these investments, allowing it to recycle the funds into new growth opportunities.

The company will pay shareholders a fully franked interim dividend of 66.7 cents per share. This is up from 62.7 cents per share in the prior corresponding period.

Outlook.

Domino’s has not provided any real guidance for the second half, but notes that it has started it strongly.

During the first weeks of the second half the company has opened 11 new stores. But it won’t be stopping there, as it has significant store openings planned throughout the remainder of the half.

This could be complemented by strong same store sales growth. It notes that same store sales have increased 6.3% so far in the second half and are now up 4.6% financial year to date. Network sales are 10.7% higher financial year to date.

Looking further ahead, management has maintained its 3-5 year outlook of 3% to 6% same store sales growth and 7% to 9% of new organic store openings.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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