Domino's fall in the right places

Date AddedSeptember 02, 2009 07:06:31 AM

Author

ELIZABETH KNIGHT

Domino's Pizza is another one of those companies that appeals to the stay-at-home-and-spend-less consumer who has featured strongly throughout the economic slowdown.

Like pay television companies and home entertainment providers such as JB Hi-Fi, Domino's thrived in 2009.

This is not to suggest that these companies' sales revenue will fall off a cliff when consumer confidence returns, it's just that they won't have the added advantage of selling relatively low-cost goods and services to a financially conservative consumer.

A major fast food competitor, McDonald's, has also experienced strong earnings on the back of a similar consumer mindset.

McDonald's US boss Jim Skinner said last month: "As consumers find themselves more cash-strapped and time-challenged, they continue to count on McDonald's for value, convenience and variety across our menu."

Within the McDonalds world empire Australia has been the star. 'The growth down under has been remarkable over the past year and shows no signs of abating, Skinner said.

Domino's, like JB Hi-Fi, has an ambitious store roll-out plan that will underwrite big future earnings growth. While there are plans for many new pizza outlets in Australia, the new store expansion is weighted towards Europe.

On the back of the expansion, the pizza maker is forecasting full-year growth in net profit of between 10 and 15 per cent in 2010.

JB Hi-Fi is also predicting a steep growth trajectory for sales managed to improve like for like sales growth of 11.5 per cent in 2009.

Parallel to its new store roll-out, Domino's is moving many of its stores from the corporate ownership to a franchise model which is enhancing is cash levels and reducing debt. Chief executive Don Meij said today this process started well before the debt crisis.

Its net profit after tax improved an impressive 29.7 per cent.

The challenge for Domino's - and other fast food companies - will be to continue to capture same-store sales growth once the consumer decides that eating out falls within their budget.