Domino’s Pizza (LON: DOM) share: Will 2022 be a turnaround year?

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 Domino’s Pizza (LON: DOM) share: Will 2022 be a turnaround year?
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Highlights 

  • Domino’s Pizza reported robust sales growth for the year ended 26 December 2021.
  • The total system sales of the company were up by 11.2% to £1,499.1 million, driven by higher pizza orders during the lockdown.
  • The company expects medium-term system sales of at least £1.6bn-£1.9bn and plans to open 200 new stores.

Well-known pizza delivery chain Domino’s Pizza Group Plc (LON: DOM) announced its results for the 52 weeks ended 26 December 2021. The UK-based business, a franchisee of Domino’s Pizza in the US, witnessed robust sales growth despite multiple challenges like inflation and staffing issues.

The FTSE 250 listed company’s total system sales were up by 11.2% to £1,499.1 million, driven by higher pizza orders during the lockdown. Also, a positive TV ad campaign and key events like the Euro soccer tournament helped boost the takeaway orders. The total group revenue was at £560.8 million, while the underlying EBITDA rose by 8.7% to £136.4 million.

Focus on digital growth

Domino’s Pizza reported growth in order numbers mainly due to excellent service standards and continued recovery in collections. Out of the total order received, around 91.2% of orders were through digital channels. Also, the average delivery time of order was around 25 minutes. As a result, the underlying profit before tax increased by 12.5% to £113.9 million.

In December 2021, the company reached a resolution with its franchisees. As part of the resolution, Domino’s Pizza Group will invest £20 million over the next three years to accelerate digital growth and open new stores.

Following the agreement, Domino’s Pizza expects medium-term system sales of at least £1.6bn-£1.9bn and plans to open 200 new stores. Moreover, the company expects its underlying EBITDA and EPS to be in line with market expectations for the new financial year.

Return of Capital

The company’s board has proposed a final dividend of 6.8p per share, which will be paid to eligible shareholders on 10 May 2022, bringing the total dividend payout to 9.8p per share for 2021. Also, a new £46 million share buyback program was announced for the shareholders.

Will share price bounce back in 2022?

Domino’s Pizza’s stock is down by over 22% year-to-date as investors fear rising cost inflation might impact the business operations. However, the company’s flexible and robust business model may help it overcome challenges. Also, the recent decline in share price is mainly due to the overall selloff in the UK stock market due to the Russia-Ukraine conflict. The resolution with its franchisees will help the company boost its sales numbers in 2022.

Domino’s Pizza Group share price

(Image Source: Refinitiv)

After the result announcement, the company stock witnessed a lot of volatility. The shares however, closed the day at GBX 368.00, up by 5.44% on 08 March 2022. The stock held a market cap of £1,563.60 million. The company’s current dividend yield stands at 3.5%.

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