Domino’s Share Price Sinks on Trading Update (ASX:DMP)

The Domino’s Pizza Enterprises Ltd [ASX:DMP] share price is plummeting after the release of a trading update for the 2022 financial year.

DMP shares are currently exchanging hands at $124.79 per share, a drop of 12.30% at time of writing.

ASX DMP - Domino Share Price Chart

Source: Tradingview.com

Domino’s financial performance

In FY21, Domino’s recorded the following:

  • Network sales of $3.7 billion, up 14.6%
  • Online sales of $2.9 billion, up 21.5%
  • Underlying EBIT of $293 million (up 27.2%) on revenue of $2.2 billion (up 15.4%)
  • 281 million pizzas served

Now let’s turn to DMP’s performance in the first 18 weeks of FY22:

  • Network sales up 8.0%
  • Same store sales up 4.3%
  • 222 stores added (66 new stores)

So why the market’s sour reaction?

Domino’s acknowledged sales growth ‘has been uneven across regions, with operations affected by local conditions including lockdowns and ongoing changes in customer behavior.’

This lack of visibility rendered short-term forecasting ‘challenging’.

Domino's Presentation

Source: Domino’s presentation

So what does this mean for DMP shares?

Analysts from investment bank Macquarie described Domino’s performance as ‘uneven’.

The bank cut its DMP earnings per share expectations by 5.1% in FY22, and 2.2% in the two following financial years.

Goldman Sachs, too, downgrade its EPS forecasts from $2.77 to $2.52 in FY22, also cutting its expectations for FY23 and FY24.

Domino’s Group CEO and Managing Director Don Meij remained upbeat:

Because of the actions we have taken during this pandemic, I am confident we have built a significantly stronger business, prepared for the next phase of our growth. Simply being able to trade during COVID-19 was a privilege not available to many businesses, including some of our stores.

Our growth in total sales, online sales, new store openings and profit were made possible because of a long-term strategy that laid a platform for our future — both online and in stores.

Domino’s has determined that it will increase the dividend payout ratio from 70% to 80% ‘in recognition of this new phase in the Domino’s growth.

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Regards,

Kiryll Prakapenka,

For The Rum Rebellion

PS: The Rum Rebellion is a fantastic place to start your investment journey. We talk about the big trends driving the Australian Economy. Learn all about it here.

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