Own Domino’s shares? Here’s how the company plans to grow through tough times

The Domino’s share price is 60% down on its pandemic high. We summarise the pizza giant’s plans for growth.

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Two parents and two children happily eat pizza in their kitchen as a top broker predicts a 46% upside for the Domino's share price

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Key points

  • The Domino's share price has fallen 60% from a 52-week high of $167.15 in September 2021 to $66.15 at market close on Friday  
  • In a recent presentation, Domino's outlined its growth during the pandemic and plans for future growth 
  • Strategies include hiring more people, opening more stores, using bicycles for deliveries, and more TV advertising 

Shares in Domino’s Pizza Enterprises Ltd (ASX: DMP) have been killed in 2022. The Domino’s share price has fallen 60% from a 52-week high of $167.15 in September 2021 to $66.15 at market close on Friday.

Domino’s was among the pandemic winners on the ASX. Immediately before the crash, the Domino’s share price was trading at about $62 — a few dollars lower than today’s share price.

Then people were put into lockdown. Takeaway and delivery meals became extremely popular. Brands like Domino’s actively leveraged the pandemic to grow their business through measures such as a ‘zero contact delivery service’ to entice more customers.

Now that lockdowns are over, has the Domino’s share price simply come back down to Earth?

Domino’s grew alongside its share price during COVID-19

In a recent presentation, Domino’s outlined its growth during the pandemic and plans for future growth.

Domino’s has franchises all over the world. According to its presentation, there are currently 3,327 stores across 10 markets. Six are in Europe and four are in the Asia-Pacific region.

Over the two years of the pandemic, network sales increased by 29.5%. EBIT increased by 25.2% and the network’s store count increased by 24.3%. They’re the stats for H122 compared to H120.

What Domino’s is going to do next…

Over the long term, Domino’s is aiming for 3,600 stores in Asia-Pacific (83.8% growth) and 3,050 stores in Europe (123% growth).

The presentation described the “engine of our growth” as digital sales, with a compound annual growth rate (CAGR) of 26.75% since FY14. Online sales accounted for $557 million in sales in FY14 compared to $2.93 billion in FY21.

Customers are increasingly wanting their food delivered. In Domino’s markets, online food delivery orders in the quick service restaurant (QSR) sector are forecast to rise 46.9% by 2026, according to Statista.

The challenge of this rising trend is finding enough staff to meet the increasing demand for delivery. So, growing the labour pool is a priority.

Domino’s intends to grow its customer base by spending more on advertising, particularly television, and growing its store network.

The company says it’s also possible to reduce delivery costs by a third in every market. One way to do this is to reduce the reliance on cars to deliver food and instead use bicycles.

Domino’s acknowledged current global economic headwinds in its presentation.

“We face historic headwinds, including inflation, conflict in Europe, and currency movements, but we are focused on the long-term”.

Motley Fool contributor Bronwyn Allen has positions in Dominos Pizza Enterprises Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. 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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