Domino’s Skyrockets 16.68% After Revealing First Half Results

It’s earnings season, some companies are faring well while others are underperforming. I don’t know how many of you buy pizzas. But there must be millions of you. Domino’s Pizza Enterprises [AXS:DMP] have exponentially grown in recent times. They always seem to come out on top. Growing earnings at an astonishing rate and expand their entire business. And this morning was no different.

DMP managed to increase NPAT (Net Profits after Tax) by 56.7% compared to the prior corresponding period. NPAT for H1 FY16 total in at $45.6 million. The increase, DMP states, was driven by organic growth.  And what’s astounding is DMP’s ability to achieve this growth in such harrowing times.

Once market opened, DMP’s share price was off. Share jumped 16.68% to a high of $61.00 per share. However shares began to retreat seconds after the market opened.

Domino's DMP Share Price

Source: Google finance

Domino’s plans to expand…again

It was only three months ago that DMP increased their expansion into Europe. DMP acquired Germany’s largest pizza chain, Joey’s pizza, back in December. It was expected that millions would be added to DMP’s revenue’s because of the acquisition. And now DMP is looking to expand not only their business, but their menu as well.

DMP’s strongest performers within Europe are the Netherlands and Belgium. And by 2025 their European chain will be more than double that of their Australian operations. CEO Don Meij said customers would ultimate determine what DMP delivers. But the pizza chain has big plans for the future of their menu.

DMP recently added BBQ pulled beef and chipotle chicken to its menu. Yet more changes are likely to come as DMP has always kept pace with food trends. DMP is a leader in fast food however. They dominante their competitors in delivery times with a 20 minute guarantee.

Meji believes this is Domino’s major competitor advantage, stating:

Our commitment is to a philosophy of being slow where it matters, faster where it counts. Slow in the careful preparation of high quality pizzas, safe delivery and friendly service at the door. Fast in that we are cutting the cook time in half, hustling to and from cars and using faster ovens and improved technology.

It almost seems like DMP is the parallel of Henry Ford’s company, Ford Motor cars. The invention of the production line/process allowed Ford to mass produce cars to the public. Until then it wasn’t possible for everyone to own a car. Everyone owning a pizza might not translate, however mass producing pizza’s is what DMP is all about.

With the amount of pizzas that DMP can produce, costs may be cut. And one place to cut is their product prices. Cutting them to the bare minimum. DMP’s $5 cheaper Everyday Campaign was a key drive in their NPAT increase.

What’s ahead for Domino’s

Along with their half year results, DMP also gave guidance’s for FY16 yearly results.  With store growth, sales and margin improvements all looking positive DMP believes they can grow NPAT by 35% on a full year basis.

There is expected to be 4,250 new stores opened by 2025 which included 2,500 stores in Australia and New Zealand. With all these plans in motion could it be another stellar year for DMP? At the moment DMP’s shares are still down for the year. Even though they are only down marginally they will need to make up for lost time.

DMP was able to climb 128.90% last year. If they can again produce triple digit returns for this year uncertain as of yet. But they are off to a good start.

Härje Ronngard,

Junior Analyst, Money Morning

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