Dominos Pizza continues to deliver on time

<p>Shares in Domino’s Pizza rallied 6.5% in trading on Thursday after the delivery chain reported strong growth in sales for the first quarter. The earnings […]</p>

Shares in Domino’s Pizza rallied 6.5% in trading on Thursday after the delivery chain reported strong growth in sales for the first quarter. The earnings continues along a long line of strong quarterly performance for the business that has sought growth both in its home markets of the UK and Ireland as well as expansion into Germany and Switzerland.

Domino’s saw like-for-like sales growth in the first quarter of 6.6% with total system sales rising 12.3% to £164.1m. This marked faster growth in sales compared to the same period last year when the firm saw sales growth of 4.1%. The company expects trading to be in line for this year.

Domino’s is technically advanced in terms of its online and mobile offering and this is where it is well placed to capitalise on the changing consumer habits where other firms such as HMV have failed. 61.9% of all UK sales for example are now executed via the web, whilst 25.2% of all online sales is now placed via a mobile device, marking an increase on 49.8% and 16.4% respectively last year.

Shares in Domino’s have been on an upward trajectory for over a decade, with prices trading at 30p in 2003 they are now trading above 600p. Prices had sold off in the last two days after a strong start to the year with Liberum Capital warning over Q2 performance and investors banking their profits ahead of today’s Q1 report. In this sense, the bounceback in the company’s shares price is expected with the quarterly result helping to calm fears of heightened expectations during a period when intense snow fall forced some store closures.

The key now is how the company will perform in the second quarter – a quarter where CEO Lance Batchelor admits has ‘extremely tough comps (comparatives).’ Liberum warned earlier this week that the second quarter could see the first decline in like-for-like sales in more than four years at the pizza chain. In the first half of last year (Q1 and Q2), Domino’s reported like for like sales of 5.2%, more than double that of the previous year and with Q1 sales growth of 6.6% this year already, the bar is heightened for H1 2013. Momentum is with the company however and so it is dangerous to go against such a strong recent trend at this point.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.