Domino’s Pizza Share Price Falters despite Expansion Plans

Domino’s Pizza Enterprises Ltd [ASX:DMP] has, at time of writing, fallen back to $42.90 a share at a loss of 4.37%.

While the company has agreed it was a disappointing FY19, Domino’s currently has big plans to double its store network throughout Europe and Asia by 2028.

Why be the anchovy when you can be the cheese?

The pizza chain yesterday revealed their first quarter results for the US market, reporting higher than expected earnings but slowed sales growth in expansion areas, most notably within the European market.

Overall, it reported revenue of $836 million — just shy of the expected $849.6 million result.

Some analysts have blamed Domino’s aggressive expansion tactics for the shortfall, saying that their desire to compete so aggressively with rivals like Pizza Hut has led to ‘cannibalization’ in the States, hurting domestic sales.

Domino’s has blamed ‘third-party aggregators’ like Uber Eats for the added pressure on domestic stores.

In any event, this has not stopped the company from ‘aggressively’ perusing this tactic elsewhere, with this month’s latest announcement that the company has formally agreed to launch in Denmark.

Should you take a slice of the Domino’s pie?

Even with the very real concerns surrounding weakness in the European market (and the possible shortfall of expectations for FY19), it’s hard not to think that investors have hit the panic button a little too early.

Despite their revised EBIT guidance range in February, Domino’s were still able to deliver a stronger than expected quarterly result. And whether you agree with their outlook, the company is firmly set to expand their network, with the next phase to introduce stores in Japan.

Morgan Stanley and Goldman Sachs rate the company as a buy, most likely as a result of these expansion plans. They suggest, with patience, Domino’s could be a very profitable long-term investment.

Regards,

Ryan Clarkson-Ledward
For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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