Domino's Pizza share price in focus as full-year sales near $4b

Domino's released its full year earnings and news of a major acquisition today.

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Key points

  • The Domino's share price could be a major mover on Wednesday following the release of the company's full-year earnings
  • The pizza giant posted $3.92 billion of sales – a 4.6% year-on-year improvement. However, its profit tumbled 12% to $165 million and it slashed its final dividend to 68.1 cents per share 
  • The company also announced its acquiring new markets in Malaysia, Singapore, and Cambodia

The Domino's Pizza Enterprises Ltd (ASX: DMP) share price is in focus today after the company released its full-year earnings.

The company also announced it's expanding its footprint into three new markets – Malaysia, Singapore, and Cambodia – through the acquisition of 287 corporate stores for upwards of $214 million today.

Shares in the S&P/ASX 200 Index (ASX: XJO) pizza chain franchiser last traded at $67.07.

Domino's share price on watch on record store growth

Here are the key takeaways from Domino's financial year 2022 (FY22) results:

  • Global sales came to $3.92 billion – a 4.6% improvement on those of the prior corresponding period (pcp)
  • Underlying earnings before interest and tax (EBIT) fell 10.5% to $262.9 million
  • Revenue lifted 4.1% to around $2.29 billion
  • Underlying net profit after tax (NPAT) slumped 12.5% to $165 million
  • Underlying earnings per share (EPS) reached 190.6 cents – a 12.6% slip
  • Declared 68.1-cent 70% franked final dividend, leaving its full-year payout 9.8% lower at 156.5 cents per share

In the Asia Pacific, Domino's sales grew 4.9% last financial year while its EBIT slipped 9.7%. Over in Europe, regional sales rose 4.3% to $1.5 billion while EBIT fell 11% to $78.8 million. Full-year EBIT grew 2.8% in Australia and New Zealand, reaching $3.3 million.

Its total EBIT of $262.9 million represented a year-on-year fall but was 19.1% higher than pre-pandemic levels. This was largely driven by changing sales conditions in the first half, a multi-million reinvestment in its Australia and New Zealand franchise business, and the rebuilding of its Danish business.

The company's online sales surpassed a milestone $3 billion in FY22, lifting 4.4% to get there.

Domino's added 450 new stores in FY22 – 294 organically and 156 through acquisition ­– a 15.3% increase and a new record. It ended the period with 3,387 stores globally.

What else happened in FY22?

The financial year just been was an exciting period of growth for the pizza giant.

It surpassed a major milestone in Japan, opening stores in all of the country's 47 prefectures, making it the only pizza company with a national footprint. Sadly, the Domino's share price slipped 3% on the back of the news.

FY22 is also the first year in which the company is reporting earnings from its Taiwan business. Domino's announced its plan to acquire 156 stores in the nation in late FY21, marking its entrance in a tenth Asia Pacific market.

What did management say?

Domino's CEO and managing director Don Meij commented on the company's earnings, saying:

We have reached a challenging but important milestone, as we transition from 'living with COVID' to facing historic inflation, on track for a significant expansion in delivered food across the Quick Service Restaurant industry.

It is clear that this inflationary environment, more than any we've seen historically, requires a nuanced and multi-layer approach: reducing costs and maximising the benefits of scale, lifting menu prices where appropriate, and balancing these with 'inflation busters' that shows Domino's consistently offers choice.

We made clear when COVID first affected us that we would be investing in growth … Today, we can measure ourselves against those goals, and are pleased with our performance drawing a line from 'pre-COVID to now' – integrating a new market, adding 865 stores (+34.3%), growing sales by 35.2%, and EBIT by 19.1%.

What's next?

Domino's didn't provide any exact earnings guidance today. Though, it outlined several growth expectations and provided a brief trading update.

Meij said the market for delivered food was expected to grow more than 45% by 2026, and the company is jumping onboard for the ride. It intends to continue growing its network by 8% to 10% annually, focusing on opening stores closer to customers, thereby increasing customer satisfaction and lowering the costs of delivery services.

Delivery efficiency is also a pillar stone of the company's response to inflation. That's brought promotional offerings and pricing initiatives, such as the addition of a delivery service fee.

Domino's also expects its same store sales to grow between 3% to 6% this fiscal year.

The company has already opened 13 new stores in FY23. Meanwhile, its network sales have slipped 2.4% over the start of FY23 compared to those of the pcp.

Domino's share price snapshot

The Domino's share price has had a particularly rough trot as of late.

It has fallen 45% since the start of 2022. It's also trading 53% lower than it was this time last year.

For comparison, the ASX 200 has dumped 8% year to date and 7% over the last 12 months.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. 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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