Downgrades see Domino's shares dive after pizza boss reaffirms company's long-term outlook

Downgrades see Domino's shares dive after pizza boss reaffirms company's long-term outlook

Domino's Pizza Enterprises managing director Don Meij.

Domino’s Pizza Enterprises (ASX: DMP) is on track to more than double its store network by 2033 according to managing director Don Meij who today reaffirmed the group’s long term outlook, but conflicting perspectives from analysts have seen shares in the company dive this morning.

Meij today told investors at the group’s Annual General Meeting that the company’s future was looking bright, unveiling a trading update in the process which shows Domino’s network sales were up by 8 per cent in the financial year so far.

During the first 18 weeks of FY22, 222 stores were added to the overall store network, but sales growth was uneven across regions, with operations affected by local conditions including lockdowns and ongoing changes in customer behaviour which Domino’s says makes “short term forecasts challenging”.

Despite the uncertainty, Meij said because of actions taken during the pandemic he is confident Domino’s is “significantly stronger” and prepared for the next phase of growth.

“Simply being able to trade during COVID-19 was a privilege not available to many businesses, including some of our stores. That meant we were determined to give back to our community where possible, and avoid unneeded government supports,” Meij said.

“Our results were not the inevitable outcome of being allowed to keep our doors open to trade during a pandemic.

“Our growth in total sales, online sales, new store openings and profit were made possible because of a long-term strategy that laid a platform for our future – both online and in stores.”

Meij also emphasised the company’s commitment to its ‘Domino’s for Good’ environmental, social and governance (ESG) plans.

In the coming year, Meij said Domino’s intends to step up to the ESG plate, including working with supply-chain partners to improve visibility of the risks of modern slavery and completing the inaugural footprint assessment, including carbon emissions, land and water usage and its impact on biodiversity.

“In the next 12 months, we will set time-bound and science-based targets with an interim goal and a commitment to reach net-zero greenhouse gas emissions before 2050,” Meij said.

“We are embracing this responsibility to take action now and inspire our industry and supply chain partners.

“We intend to deliver a more sustainable future without compromising on the quality of our food – pizza is an indulgence and our customers deserve that choice.”

Meij also announced the company is partnering with Compassion in World Farming (CIWF) on the Better Chicken Commitment - a science-based chicken welfare policy that addresses issues related to breeding for fast-growth and high-yield, housing, stocking density, and slaughter.

“Domino’s crushes convention and high-quality food can be affordable, ethical and sustainable – I am pleased to announce we will partner with Compassion in World Farming (CIWF) on their Better Chicken Commitment, expanding this commitment from Europe to include Australia and New Zealand,” Meij said.

Since the AGM, shares in DMP are down 12.06 per cent, largely due to brokers and analysts issuing downgrades.

Macquarie cut earnings per share (EPS) expectations by 5.1 per cent for FY22, while Goldman Sachs forecast EPS would be down to $2.52 from $2.77.

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