Domino's Pizza : Largest Franchisee Goes Online For Profit Growth

Tuesday, August 12, 2014

* Domino's FY underlying net profit up 50 percent to $42.4 mln * Company focusing on growing online sales * Expanding in Japan, Europe, Australia (Recasts, adds details on online sales, forecasts)

Australia's Domino's Pizza Enterprises Ltd, the largest franchisee for the brand in the world, is banking on online orders to help it achieve 20 percent earnings growth this financial year after they lifted net profits by half a year ago.

Orders via social media, apps and its websites accounted for 60 percent of total annual sales in the year that ended June 2014, the company said on Tuesday, helping drive full-year underlying net profit after tax up 50 percent to A$45.8 million ($42.4 million).

The company comprises Domino's Australia and New Zealand restaurants and last year bought a controlling stake in Domino's Japanese franchise. It also runs restaurants in France, Belgium and the Netherlands.

This year, Domino's Pizza Enterprises (DPE) expects online orders to grow to 80 percent of sales. It currently offers online ordering in Japan, Australia and New Zealand, and the roll-out of the online system in Europe is due to be completed by June 2015.

Chief Executive Don Meij said sales reports from all regions in the first five weeks of the current 2014/15 financial year suggest the company is on track to achieve higher growth.

"We are confident of continuing the current strong momentum to deliver EBITDA (earnings before interest, tax, depreciation and amortisation) growth in the region of 20 percent and add approximately 175-185 new stores to the group," he said in the earnings statement.

DPE's strong performance contrasts with rival McDonald's Corp, which last week reported a steeper-than-expected 2.5 percent fall in global sales in July and singled out Australia and Japan as poorly performing key markets.

DPE's revenue in 2013/14 doubled to A$588.7 million, lifted by the acquisition of a 75 percent stake in the Japanese franchise.

Domino's shares surged as much as 12.8 percent to A$24.25 after the earnings were released, outperforming a 1.3 percent gain in the S&P/ASX 200 index.

DPE says it is the leader in Australia's A$3.5 billion a year pizza market, which is the world's third largest outside the United States.

In Australia, DPE said it intends to open 900 restaurants in the 2015 financial year, 100 more than it initially targeted.

In Japan, the company has boosted marketing and is moving stores to upmarket locations to entice customers seeking to upgrade their fast-food dining experience.

DPE earlier this year appointed Jack Cowin, the owner of Australian Burger King franchise Hungry Jacks, as chairman.

Morningstar equities analyst Daniel Mueller said pizza was a rapidly growing, attractive category within the fast food sector, adding that his brokerage had an exemplary rating on Domino's management. ($1 = 1.0792 Australian dollar)

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