Domino’s Fails To Deliver – Share Price Drops

Domino’s Pizza [ASX:DMP] shares have fallen more than 20% after the company failed to meet its own earnings guidance targets.

While net profit after tax was up 28.8% from last year, the company failed to deliver on a 32.5% growth it told investors it would achieve at the half yearly update in February.

Same-store sales growth in Australia was 13.8%, missing the bottom of the guidance range of 14–16%. And the figures were even more disappointing in Europe and Japan.

The company was trading on a high Price-Earnings (PE) ratio of around 37 before today. The slowdown in growth, particularly in the second half of the year, will have spooked investors who rely on the growth potential of the stock to justify such a high PE ratio.

The company have blamed this result on some issues in their online platform in France.

An emerging threat

With the strong growth in food delivery services such as Deliveroo and Uber Eats, the technological advantage Domino’s once had over competitors may be coming to a swift end.

Uber Eats replicates all of the advantages that the Domino deliver app had, yet is available to many take away restaurants.

The next set of results will be crucial in evaluating how this left field threat has developed, and whether this was just a temporary blip in the company’s strategy, as they are claiming.

Good Investing,

Ryan Dinse,
Editor, Money Morning

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Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle.

Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.

Ryan's premium publications include:

Money Morning Australia