British subsidiary, Domino’s Pizza Group (LON:DOM) saw its shares slide as orders fell for the second quarter in a row.
Having initially risen by 1.8% during the first quarter of FY 2020, total orders fell year-on-year by 11.3% during the second quarter and then again by 6.0% in Q3.
These dips in orders were led by a significant contraction in collection-based orders. While delivery orders rose consecutively by 2.5%, 22.4% and 11.8% over the three quarters, collections were flat, before dropping considerably by 87.2% and 41.5%.
In more positive news, UK Domino’s announced that it had opened five new stores during Q3, and thirteen during the year-to-date, with only one planned closure.
It added that online sales growth stood at 35.6% in its UK operations and at 18.0% in the Republic of Ireland. It added that in the UK, online orders now account for more than 95% of its delivery sales and 68.5% of its UK and ROI collection sales, up from 45.8% year-on-year.
On its supply chain, Domino’s said that its supply operations service levels retained 99.9% availability and accuracy, and construction of its facility in Scotland remains on track. However, COVID-related costs in its supply chain, enabling social distancing, will amount to around £2 million.
Domino’s Pizza Group hopes to implement well-rounded strategy
Speaking on the results and the company’s strategic outlook, CEO, Dominic Paul, commented:
“I am pleased to report a strong performance in Q3. Delivery orders were up 11.8% and we also benefitted from the reopening of our collection business. I am delighted by the agility the Group and our franchisees have demonstrated in order to maintain our momentum. We welcome the UK government’s reduction to VAT in mid-July which helped franchisees mitigate costs and gave them the opportunity to pass savings on to customers.”
“Working closely with our franchisees we continue to do everything we can to keep our people and customers safe, including wearing masks, the use of perspex screens, contact free delivery and collection and continued menu rationalisation. It is a privilege to stay open and serve our local communities, and we are confident that we have operational plans in place to adapt to different levels of lockdown that may arise in the coming months. I would like to say a huge thank you to the Domino’s teams across our system for their dedication and hard work.”
“We continue to work on a long-term strategic plan for the business. At the heart of our future plans is realignment with our franchisee partners and we are having detailed discussions to agree a sustainable way forward, although we continue to expect that these discussions will take some time. Despite the ongoing uncertain backdrop, we expect to report full year Underlying Group PBT in the range of £93m to £98m, in line with market consensus.”
Investor notes
Following the news, Domino’s Pizza Group shares fell by 8.82% or 32.81p, to 339.19p apiece 15/10/20 13:18 GMT. This is 7.3% above its target price of 315.00p a share, but a notable drop from its year-to-date high of 372.00p a share, seen on October 14.
The company currently has a p/e ratio of 21.24, slightly below the consumer cyclical average of 26.34. Analysts have a consensus ‘Sell’ stance on the company’s stock, while the Marketbeat community gives it a 50.91% ‘Outperform’ rating.
