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DMP - DOMINOS PIZZA ENTERPRISES LIMITED


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Statement from DMP re allegations in AFR article - 'Star' Domino's franchisee alleges misleading and deceptive conduct

DominoÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s Pizza Enterprises Limited (the Company) notes the article in the Australian

Financial Review today regarding claims made by a franchisee.

 

The matter relates to a commercial dispute between the Company and the franchisee

which have been the subject of discussions with the franchisee for some time. The

Company has not been served with the formal legal proceedings referred to in the

article but is aware of the general nature of the claims. The Company rejects those

claims and will defend the proceedings.

 

The Company would further like to add that, subject to discrete contractual

exclusions, during the period of the sub-franchise agreement neither DominoÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s

corporate stores, nor other DominoÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s franchisees, may open another store in that

territory. This provides franchisees certainty about their investment as the number of

households in their territory cannot, without the franchiseeÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s agreement, be

decreased throughout this term.

Current short positions @ 10 December 2018 = 9.59%

https://www.shortman.com.au/stock?q=dmp

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For a company that missed guidance for the third year in a row, Dominoâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s result was actually pretty well received. Softer than expected earnings and sales growth in Australia mattered less than a stellar performance in Japan, where a 59 per cent jump in earnings before interest and tax served as a reminder of the international opportunities for a business that now generates 55 per cent of its earnings offshore.

 

Clearly Dominoâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s Australian growth looks constrained, even if does appear to have made good headwind in cleaning up its franchise network in 2018-19. But if Japan can keep firing and earnings growth in Europe (9 per cent in 2019) can move closer to sales growth (which was 15 per cent), a more attractive picture emerges.

 

The business could deliver double-digit earnings growth in 2020 and, after falling in value by more than 20 per cent in the past year, now trades on a price-to-earnings multiple of 24 times....

https://www.afr.com/markets/equity-markets/...20190823-p52jzk

 

- don't buy the product, can get my cardboard intake cheaper elsewhere

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David Thornton: Hello and welcome to Buy Hold Sell. I am your host, David Thornton. It has been a pretty wild ride for stocks in 2022, but the ASX 200 is holding up pretty well.

Today, we are going to discuss [some] laggards. For that, we are joined by Anthony Aboud from Perpetual, and Sean Fenton from Sage Capital.

David Thornton: Okay. The other laggard, Domino. That one, Domino’s has not had a good time of it. It has lost about two thirds of its value since September. Now sitting at $63. Buy, hold, or sell?

Anthony Aboud (SELL): I still think it is a sell. I think that the market consistently overestimates these guys. This time last year for FY23, the market had $3 a share in EPS forecast. It is now going to be just over $2. Our problem is in the short term we think franchisee profitability is going to be tough. They have got labour price going up. You got cost of goods sold from going up. And therefore, we think the rollout of stores is going to be tough, so the growth is not going to be there and still 30 x PE. For us, it i’s just not there yet, so we still think it is a sell.

David Thornton: Sean, they are rolling out stores. Is it a sell for you?

Sean Fenton (SELL): Yeah, I think it is. I am finding myself agreeing with Anthony a lot today, I do not know, it is worrying me a little bit. But yeah, it was a bit of a COVID 19 beneficiary. It has fallen a long way, but got ridiculously expensive. And what I am just uncertain about is, as we open up normalisation, what happens to that pizza demand? They did really well in Japan, but it has been a struggle longer term. How much of that does that turn around? And you have got cost pressure inflation there. Do not forget they have got a delivery model. Drivers, labour, petrol, pizza, wheat, cheese, dairy, pepperoni, it is all going up. Yeah, a bit of margin pressure and a fair bit of uncertainty. It is just not cheap enough to get excited about.

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