ii view: Domino's Pizza could deliver bigger profits in 2025
Pursuing plans to open 600 new stores by 2033 and with shareholder returns totalling £500 million in the past four years. Buy, sell, or hold?
11th March 2025 16:10
by Keith Bowman from interactive investor
Full-year results to 31 December
- System sales up 2% to £1.57 billion
- Adjusted profit (EBITDA) up 6.4% to £143.4 million
- Final dividend of 7.5p per share
- Total 2024 dividend up 4.8% to 11p per share
- Net debt of £265.5 million, up from £233 million a year ago
Guidance:
- Expects full-year 2025 adjusted profit of between £143 million to £148.2 million
Chief executive Andrew Rennie said:
"Today's results show the benefits of our long-term strategy. Our trading momentum accelerated as the year progressed, our delivery channel returned to growth and we delivered strong underlying earnings growth.
“2025 has started positively in an uncertain market. With a good store opening pipeline, I am confident that with the quality of our teams and franchise partners, our unrivalled scale, resilient business model and capabilities, Domino's is well placed to thrive in 2025 and beyond."
- Invest with ii: SIPP Account | Stocks & Shares ISA | See all Investment Accounts
ii round-up:
Domino's Pizza Group (LSE:DOM) today delivered annual profit that matched City forecasts, with sales for the first ten weeks of 2025 up 2.4%.
A 2% increase in system sales year-over-year to £1.57 billion helped fuel 6.4% growth in adjusted profit (EBITDA) to £143.4 million. Domino's expects new store openings to be in excess of 50 in 2025, with adjusted profit expected to be in line with current analyst forecasts of between £143 million and £148 million.
Shares in the FTSE 250 company fell 3% in UK trading having come into these latest results down 20% over the last year. That’s similar to shares of budget pub operator Wetherspoon (J D) (LSE:JDW) and below a near 2% gain for the FTSE 250 index over that time.
The UK listed Domino’s operates the master UK and Irish franchise for the US stock market listed parent company, with stores across the UK and Ireland.
Total orders for 2024 rose 1.7% to 71.4 million with deliveries up 2.4% and collections gaining 0.5%. New store openings totalled 54 via 21 different franchise partners as the average delivery time fell to 24.5 minutes from 25 minutes in 2023.
Adjusted profit for the average franchisee store climbed 6.6% to £168,000 despite a 10% minimum wage increase in April 2024.
Final dividend of 7.5p per share, payable to eligible shareholders on 7 May, takes the total 2024 payment up 4.8% to 11p per share. Current Senior Independent Director Ian Bull is to replace Matt Shattock as group Chairman.
Domino’s previously announced plans to invest £3-4 million per annum into its franchise partners from 2025, with plans to hit £2 billion of systems sales from 1,600 stores by 2028, rising to £2.5 billion from 2,000 stores by 2033. That up from 2024’s year-end total of 1,372 stores.
Broker UBS reiterated its ‘buy’ stance on the shares post the results. A first-quarter trading update is scheduled for 24 April.
ii view:
The FTSE 250 listed company opened its first UK store in Luton in 1985. Today it delivers over 106 million pizzas a year. Customers using its app now total 9.5 million with the app generating 76.3% of all online orders in 2024. Along with stores in the UK and Ireland, the company also owns a 12.1% stake in Domino's Pizza Poland.
For investors, tax changes made in the October UK Budget will now see labour costs rise by around £3 million per year. High borrowing costs continue to pressure consumer spending. Group net debt of £265.5 million is up from £233 million a year ago, while competitors such as McDonald's Corp (NYSE:MCD) are not standing still, with a focus on new drive-thru outlets.
- Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
- Stockwatch: is talk of recession overly pessimistic or fair?
- 10 hottest ISA shares, funds and trusts: week ended 7 March 2025
More favourably, acquisitions such as that of Shorecal in Ireland for £62 million, adding 34 stores, have helped fuel profit growth. A previously announced five-year growth plan with franchises follows a prior period of regular disagreements between the two. Customer delivery options now include both Just Eat Takeaway.com NV (EURONEXT:TKWY) and Uber Eats, while shareholder returns have totalled around £500 million since March 2021, with the shares now offering a forecast dividend yield of close to 4%.
For now, and while risks and underperformance might deter some investors, a consensus analyst fair value estimate near 400p per share might put the pizza chain on other's watch lists.
Positives:
- Ongoing new store openings
- Pursuing a five year growth plan
Negatives:
- Tough consumer backdrop
- Intense competition
The average rating of stock market analysts:
Buy
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.