Domino's share price charges higher on improving outlook

Here's how this struggling pizza chain operator performed during the first half.

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The Domino's Pizza Enterprises Ltd (ASX: DMP) share price is charging higher on Wednesday.

In morning trade, the pizza chain operator's shares are up 4% to $41.30.

This follows the release of the company's half-year results.

Two parents and two children happily eat pizza in their kitchen.

Image source: Getty Images

Domino's share price higher on half-year results

  • Network sales up 8.8% to $2.14 billion
  • Same Store Sales growth of 1.25%
  • Online sales up 11.8% to $1.71 billion
  • Earnings before interest and tax (EBIT) down 5.3% to $107.9 million
  • Net profit after tax down 13% to $62.3 million
  • Unfranked interim dividend down 18.4% to 55.5 cents per share

What happened during the half?

For the six months ended 31 December, Domino's reported an 8.8% increase in sales to $2.14 billion. This reflects a 1.25% increase in same store sales and an 11.8% lift in online sales.

The star of the show for the company was its Australia and New Zealand segment, which delivered its strongest top line growth in six years. This helped offset the previously disclosed significant weakness in Asia, which recorded an 8.9% decline in same store sales.

Things weren't quite as positive on the bottom line, with Domino's posting a 13% decline in net profit after tax to $62.3 million. Once again, it was the company's Asia operations weighing on its performance. ANZ EBIT was largely flat, Europe EBIT rose 41.5%, and Asia EBIT sank 42.5%.

In light of its earnings decline, the Domino's board elected to cut its interim dividend by 18.4% to 55.5 cents per share.

Management commentary

Domino's Group CEO and Managing Director, Don Meij, acknowledged that it wasn't a strong half but remains positive on the future. He said:

Today's results show we are rebuilding, and the sales initiatives we have applied in Australia/New Zealand are getting traction in some of our international markets. They also show more is required to get the same results across all 12 of our markets.

The past 12 months have reinforced the importance of launching inspired new products, designed for delivery, to give customers more choice on more occasions – whether it's a family bundle, a lunchtime offering, or an on-the-go snack. Our approach is unchanged; the difference in our performance across markets is our execution.

Outlook

One thing that is likely to be giving the Domino's share price a lift today is management's outlook commentary.

It notes that recent trading has demonstrated Domino's successful approaches in one market have applications across multiple markets.

For the first seven weeks of the second half, its same store sales growth is as follows:

  • ANZ up 8.39%
  • Europe down 0.64%
  • Asia up 0.34%

In respect to the Asia market, same store sales are now positive in the troubled Japan business (+6.7%). This could be a sign that the company has managed to turn around its fortunes at last.

Mr Meij concludes:

As we work to serve our customers across different countries, cultures and taste preferences, our customers share a common desire for high quality meals, delivered fast, at an affordable price. We believe Domino's is well placed for this future, and we will work hard to deliver.

Motley Fool contributor James Mickleboro has positions in Domino's Pizza Enterprises. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Domino's Pizza Enterprises. The Motley Fool Australia has recommended Domino's Pizza Enterprises. 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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