Domino's Pizza Group PLC (LON:DOM) Updates

Shares of Domino’s Pizza Group PLC were down over 2% on Monday following the company's announcement of several updates, including a revised franchisee framework, additional cost investments, and insights into current trading.

Analysts at RBC Capital Markets noted that the update included “plenty of moving parts,” which affected overall investor sentiment despite some positive signals.

Key Updates

• New Profitability and Growth Framework: The most significant change is a new five-year profitability and growth framework to replace the previous Memorandum of Understanding with franchisees. This plan will be fully implemented from the 2025 financial year and is expected to cost £3-4 million annually.
• Marketing Contribution: Franchisees will maintain a 4% contribution of system sales to the National Advertising Fund, with Domino’s disclosing its 0.2% contribution.
• Digital Investment Commitments: Partner contributions to eCommerce will increase from 0.75% to 1%, with Domino's contributing an additional 0.25%.
• Store Opening Incentives: Incentives for opening new stores have been extended from three to five years for both virgin and split territories, with additional undisclosed incentives for stores projected to have lower average weekly sales.

Financial Impact

Domino’s estimated a £3 million annual hit from the UK budget and has allocated £4-5 million for technology upgrades, cybersecurity, and supply chain capacity expansion. RBC noted that the unexpected cost increases contributed to investor caution.

Trading Performance

In the first nine weeks of the fourth quarter, total orders rose by 5.3%, and like-for-like sales increased by 2.7%, showcasing improvement from a softer comparative period in the third quarter. RBC analysts suggested that the new framework expenditures may alleviate concerns over a larger financial reset due to the budget impact.