Sales leap at Domino's Pizza, but its shares have a lot of growth baked in!
Despite its 26 years on British high streets, sales continue to rise at pizza-delivery firm Domino's Pizza UK & Ireland (LSE: DOM) as Brits choose take-away convenience over the expense of eating out.
The UK's first Domino's store opened in Luton in 1985, and the first Irish store opened in 1991. Today, the UK's leader in pizza delivery has 553 stores in England, 47 in Scotland, 28 in Wales, 19 in Northern Ireland and 49 in the Republic of Ireland. Hence, it's a household name across the UK -- and a Dominos leaflet comes through my letterbox almost every week.
Delivering higher sales
In its latest quarterly results, Domino's served up sales of £127 million, 10% higher than last year. In 605 established stores, like-for-like (LFL) sales growth was nearly 4%, but LFL growth in financially stretched Ireland was below 2%.
Still, Domino's powerhouse continues to be online ordering, with e-commerce sales now accounting for nearly half of UK deliveries. Total online sales rose by 36% to £45 million. This is partly due to the launch of the Domino's iPad app to accompany its free iPhone and Android apps for smartphones.
In its latest quarter, Domino's opened 15 new stores in the UK, Ireland and Germany. This takes the total so far this year to 37 new outlets, versus a target of 64 openings.
Staying fresh
In order to keep its product range fresh, Domino's relies heavily on product innovation. Popular recent revamps include Domino's Stuffed Crust pizzas and the new Gourmet range.
In addition, Domino's is revamping its board. Chris Moore, its current chief executive, is due to step down at the end of its financial year on Christmas Day, after 21 years with the group. Domino's has already groomed a successor, deputy chief executive Lance Batchelor, who will take the helm from 2011/12.
Looking ahead, Domino's CEO remarked, "We are pleased to have had a good quarter's trading and, although the economy as a whole is still very tough, we have exciting plans in place for the rest of the year. We are on track and confident that we will finish the year in line with market expectations."
A slice of Domino's
As I write, Domino's shares have slipped 25p to 483.5p, down 5% and valuing the business at nearly £785 million.
Despite its continued success in this new age of austerity, Domino's shares look rather over-cooked to me. They trade on a forward price-earnings ratio of a hefty 27 and their forecast dividend yield is a modest 2.4%, covered 1.6 times.
To me, these are demanding fundamentals, so I'd rather buy a Domino's pizza than a 'pizza' Domino's!
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