Domino’s Rises to Record on U.K. Online Expansion: London Mover
Domino’s Pizza Group Plc (DOM), the U.K. maker of the Hot Dog Stuffed Crust pizza, rose to the highest price ever as investors warm to its rapid growth in sales via the Internet and mobile phones, and an expansion in Germany.
The stock has risen 17 percent since Domino’s reported accelerating first-quarter same-store revenue growth on April 4 and is the second-best performer in the FTSE All-Share Travel & Leisure Index (FALEIS) in the past month.
“The company is capable of sustaining about a 20 percent earnings growth rate from 2014,” Douglas Jack, an analyst at Numis Securities Ltd, said on the day of the earnings report as he upgraded to stock to buy. “The risk to numbers is clearly on the upside.”
Almost 62 percent of U.K.-delivered sales in the first quarter came via the Internet, versus just less than 50 percent a year earlier, according to the Milton Keynes, England-based company. Sales via all online platforms rose 38 percent to 82.4 million pounds. Domino’s is also expanding its number of locations, with plans to open 60 new stores in the U.K. this year, and 18 in Germany.
The shares rose 2.7 percent to 665.5 pence, the highest closing price since the U.K. Domino’s became publicly traded in 1999, lifting the company’s market value to 1.09 billion pounds ($1.66 billion). Trading volume was almost 40 percent more than the daily average over the past three months.
Jack predicts the shares will rise to 700 pence, topped only by the 770-pence target of Benjamin Moore at Goldman Sachs among analysts who share their reports with Bloomberg.
The U.K. based pizza deliverer has outperformed its U.S. counterpart this year, rising 34 percent compared to a 17 percent gain, through yesterday, for Ann Arbor, Michigan-based Domino’s Pizza Inc.
The company’s German operation is forecast to become profitable by the end of 2015. It’s doubling the number of stores in the country to 36 this year. Underlying earnings per share in U.K. operations rose 22 percent last year, Jack estimated.
Domino’s Pizza operates on a franchise basis and had 810 outlets as of March 31.
The average U.K. franchisee made a profit before interest, taxes, depreciation and amortization of about 109,000 pounds a store last year, according to a company presentation. The typical franchisee owns more than six outlets. The average investment per outlet is about 280,000 pounds.
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