Domino's Pizza: Catching a falling pizza

About the author:

Author name:

By Alexander Mees

Job title:

Co-Head of Research and Senior Analyst

Date posted:

14 June 2023, 7:00 AM

Sectors Covered:

Gaming and Retail

• Domino's Pizza (ASX:DMP) has announced radical action to reduce its cost base in the face of ongoing pressures from inflation, internal inefficiencies and softer customer demand. It expects to extract annualised savings of $53-59m across the network over 2 years.
• The latest trading update shows that, while sales are looking more positive, margins are not. DMP’s roundabout guidance for FY23 leads us to lower our EBIT forecast by 12% to $207.7m. We have lowered FY24 EBIT by 12% to $243.7m.
• We retain an Add rating with a reduced target price of (login to view). In our view, DMP’s track record of superior operating performance has come off the rails in the past 18 months as it has taken the wrong approach to trying to mitigate inflation through the imposition of service fees. This misstep has been exacerbated by a global shift away from delivery and by relentless input cost inflation. But we don’t think the business is incapable of making a comeback and think it’s one to watch.

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