The Domino's Pizza Enterprises Ltd. (ASX: DMP) share price could come under investor scrutiny as its major competitor has announced growth plans.
Domino's is one of Australia's biggest fast food businesses. But key rival Pizza Hut has plans to muscle in.
Image source: Getty Images
Pizza Hut wants a bigger slice of the market
According to reporting by the Australian Financial Review, Pizza Hut Australia wants to double the size of its business within four years.
Its plan is to increase the number of Pizza Huts by more than 100% to over 500 within four years.
Pizza Hut, according to its management, has already lifted its market share from 7% to 9% since the onset of COVID-19.
A key way that the pizza peer wants to expand is with growth of delivery thanks to the utilisation of technology. Management boast that it has managed to reduce average delivery time from 49 minutes to 31 minutes.
According to the reporting, Pizza Hut is on track to achieve sales growth of 26% in the 2021 calendar year to $240 million (up from $190 million in the 2020 calendar year). The challenger is thinking it's going to add 45 outlets in 2022 and has plans for 100 new stores in the works.
In the longer-term, Pizza Hut believes that it can reach 750 outlets beyond that 4-year period, perhaps as much as 800.
The business had been growing even before COVID-19 came along, but the pandemic has acted as an "accelerant". Same store sales had increased by 13.7% for the 12 months to 31 October 2021 according to the reporting by the AFR.
One of the final insights from Pizza Hut was that it isn't facing inflation pressures thanks to long-term contracts with its parent for the next two and a half years – management say that's locked in.
Where does this leave Domino's and the share price?
Domino's is a much bigger business and also has plans to grow. In FY21, Domino's Australia saw almost $1.3 billion of network sales. At the latest count, Domino's Australia had grown its outlet count to 722.
In FY22, the overall Domino's business had seen network sales growth of 8% (on top of 14.9% growth in FY21), with same store sales growth of 4.3%.
Domino's continues to add store organically and geographically. The ASX share had a total of 3,167 outlets at the last count after opening 64 more stores and acquiring a network of 156 in Taiwan.
There are now eight markets where Domino's has more than 100 outlets in a countries: Japan (842), Australia (722), France (454), Germany (377), the Netherlands (329), Taiwan (156), New Zealand (141) and Belgium (123).
Domino's expects to more than double its business over the decade ahead with continued growth beyond that. It continues to look for opportunities in additional markets.
When the company released its FY21 result, it was expecting new store openings to be an increase of between 9% to 12% for its 3-year to 5-year outlook. By the end of 2023 it's aiming to reach 4,000 stores and by 2033 it is aiming to hit 6,650 Domino's stores.
Domino's share price snapshot
Today, the Domino's share price climbed around 4% after the volatility of last week relating to the Omicron variant of COVID-19.
