The Domino's Pizza Enterprises Ltd (ASX: DMP) share price is under pressure again on Wednesday morning.
At the time of writing, the pizza chain operator's shares are down 7% to $31.00.
This follows the release of its FY 2024 results.
Domino's share price sinks on results release
- Network sales up 4.6% to $4.19 billion
- Underlying earnings before interest and tax (EBIT) up 3% to $207.7 million
- Net profit after tax down 1.9% to $120.4 million
- Dividends down 3.7% to 105.9 cents per share
- Outlook: Poor start to FY 2025
What happened in FY 2024?
For the 12 months ended 30 June, Domino's reported a 4.6% increase in sales to $4.19 billion. This was driven by a combination of new store openings and same store sales growth of 1.5%.
A large and growing portion of the company's sales are being made online. Management revealed that its online sales increased 7.5% to $3.37 billion in FY 2024. This represents approximately 80.4% of total sales.
Domino's underlying EBIT was up 3% over the prior year to $207.7 million. A key driver of this growth was the Australia/New Zealand segment, which delivered a 10.4% increase in underlying EBIT to $124.1 million. This was a record result for these markets. This was supported by a 33.8% increase in European underlying EBIT to $70.7 million.
However, partially offsetting the above was the Asian business, which posted a sharp decline in earnings due to external factors. This includes geopolitical tensions affecting Malaysia.
This ultimately led to Domino's reporting a 1.9% decline in net profit after tax to $120.4 million.
In light of this profit decline, the company's board elected to cut its full year dividend by 3.7% to 105.9 cents per share. This includes a fully franked final dividend of 50.4 cents per share, which was declared this morning.
Management commentary
Domino's group CEO and managing director, Don Meij, appears optimistic that the company is turning a corner at last. He said:
The work we have done to deliver savings to the store network – to reduce costs in stores, and importantly in adding new, inspired products to the menu – has been crucial not only for our franchise partners, but also for customers as they increasingly choose Domino's for the great value we offer for more meal occasions.
Our performance in Australia/New Zealand and in Europe demonstrates our global strategy, with local nuances to reflect the preferences of customers, can grow market share and sales.
Meij also spoke about plans to address the underperforming France-based operations. He said:
The French market, though profitable, has underperformed in recent years and our intention is to grow the business by reaching more customers, including through aggregator platforms such as Uber. There are positive signs across our business, but more work to do in order to achieve our group franchise partner profitability target of $130,000 per store, which we believe will re-accelerate store expansion from existing franchise partners and store managers.
Outlook
Probably weighing heavily on the Domino's share price today is the company's underwhelming start to the new financial year.
Management advised that FY 2025 sales are slightly below expectations, with same store sales down 1.3%. This is largely due to timing issues as some larger markets compound highly successful limited time promotional campaigns or one-off events.
However, Meij does not believe the short-term same store sales underperformance reflects on the broader company strategy, which is delivering improvements at a store level for franchise partners. He commented:
We know the keys to earning an increased share of the enormous market for delivered food and quick service restaurants in all of our markets: serving high quality meals to our customers, with compelling value for all occasions, and by maximising our media spend – including reaching more customers through aggregators.
At the same time, we can reduce costs for franchise partners further, through menu development, expanding our use of 3rd party delivery options to serve additional day-parts, and our proprietary technology to reduce instore labour costs. Combined, we believe we have the right foundations in place for our franchise partners to get the maximum benefit from additional sales.
The company has held firm with its "flat to slightly positive" store openings guidance in FY 2025 with same store sales growth of 3% to 6%.
