Online sales the 'engine' for Domino's as new year starts off strong

An uptick in customers buying pizzas through Uber Eats and Deliveroo has helped fuel a sales surge for Domino's Australia, with boss Don Meij saying the online segment was now the company's "engine".

The ASX-listed pizza chain posted its half-year results on Wednesday, revealing strong growth in sales at its international and local stores though final figures were slightly undercooked, coming in below expectations.

Domino's CEO Don Meij released earnings that fell short of market expectations, but things are pointing up from here, the company said.Credit: Chris Hyde

Overall sales jumped 29 per cent to $905.8 million in the six months through December, falling short of analyst predictions of $951 million as operational issues at its 825 Australian stores weighed on the company.

Profit excluding one-off gains increased 6.4 per cent to $72.6 million for the half, also missing expectations. Yet the reported net profit, which includes one-off gains, grew nearly 30 per cent on the prior period.

Online sales, which occur through Domino's own platforms and 'aggregators' like Uber Eats and Deliveroo, also soared, up 18.8 per cent across the group, with Mr Meij saying online was "the engine of Domino's."

"They're driving our business," Mr Meij said. "They're growing delivery, and nobody delivers like Domino's."

This approach marks a step-change from the company's American franchise partner, which last year adjusted guidance after it said third-party delivery services were hurting the business.

Same-store sales growth across the companies divisions was "solid", according to Citi analyst Craig Woolford, growing a total of 4.1 per cent, with 5 per cent growth in Europe and 6.1 per cent in Japan.

Australia and New Zealand's same-store growth only just met the company's own target of 3 per cent, with price increases and increased corporate purchases of franchised stores weighed on growth.

Mr Woolford pointed to the increased number of corporate store acquisitions, done through the company's 'Operation 360' program, as a downside to the result, as the 21 per cent increase in corporate-ran stores had boosted capital expenditure to $49 million.

However, Domino's shares soared 9.6 per cent to $63 as investors were buoyed by a strong start to the new year.

Same-store sales grew 6.3 per cent across the group for the first weeks of the June half, which Mr Meij said was the strongest in three years. He attributed it to the re-introduction of its range of $5 pizzas and a new promotion which introduced a flat $15 cost for a delivered traditional pizza.

"In the last two months, we've had our highest sales in the last three years in Australia," he said. "Since the launch of the $15 delivery and $5 value range, business has been very good."

Domino's has asked investors in the past to look to its Japanese and European businesses for growth, and the latest half was no exception, with total sales in Japan increasing 12.2 per cent to $38 million and European sales increasing 9.4 per cent to $617 million.

Mr Meij reaffirmed the company's targets for network growth, aiming to increase the number of stores by 7 per cent to 9 per cent and same-store sales growth of 3 per cent to 6 per cent over the next three to five years.

However, the company's capital expenditure for 2020 may exceed the $60 million to $100 million forecast due to more franchisee store acquisitions, investment in new stores, and new international head offices.

Domino's boosted its dividend by 6.4 per cent to 66.7 cents per share, payable on March 13.