Domino's short-term outlook challenging

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Domino's Pizza Enterprises is facing a difficult short-term outlook as the pizza chain deals with inflation and the challenge of building on previous sales inflated by COVID-19 lockdowns.


The company told shareholders at its annual general meeting on Wednesday that it also faced foreign exchange headwinds as the Australian dollar continued to strengthen against the yen and Euro.

In the first quarter same-store sales were down one per cent, compared to the same time last year, although that was a period during which Domino's Pizza Enterprises was experiencing very strong growth with the COVID-19 lockdowns. 

But in October, same-store sales were up 1.6 per cent and chief executive Don Meij told shareholders the company was pleased with its outlook for the next eight months, including for its CBD stores. 

"While they're a smaller part of our network, they are an indicator of customer behaviour normalising, and here in Australia they're seeing very strong growth as lives continue to return to normal," he said.

Whether Domino's can deliver positive first-half same-store sales depends on a positive contribution in Europe from the football World Cup and on Christmas trading in Asia.

Excluding foreign exchange headwinds, Domino's expects to deliver full-year profit growth.

So far the company hasn't seen any reduction in commodity prices in the near-term, although the pace and scale of price increases has moderated. 

Mr Meij said the company knows inflation, particulary in Europe with its skyrocketing energy prices, is making customers consider every purchase.

"Our answer to this is delivering a high-quality product at an affordable price," he said.

There's been some softening in delivery and an increase in carry-out as more customers focus on value. 

A new mobile ordering app that rolled out in June is performing well, processing 32.3 per cent of total digital sales, up from 20.9 per cent a year ago.

Digital orders, including from aggregator apps such as Uber Eats, accounted for 78.1 per cent of Domino's $3 billion in sales in 2021/22..

The company expects to beat the record of 484 new stores opened in 2015/16, having already integrated 287 Domino's stores in Malaysia, Singapore and Cambodia it acquired via acquisition into its business.

Mr Meij said that with COVID-19, inflation, the Ukraine war and rate hikes, "there's been some very eventful events", but while the short-term outlook was challenging, the company had confidence in the medium to long term.

Domino's shares dropped 5.3 per cent to a one-week low of $60.01 on the trading update, however.

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