Pinned straw:
Big move for Domino’s today, up 22% on their latest trading update.
H1 earnings still expected to be within guidance range ($84-86m NPBT) -- although that's down from $89.6m in the pcp.
But market no doubt encouraged by same store sales turning positive after a rather rough patch. Also, some big cost-cutting moves and a massive pull back in the Japanese market seen as a good thing. That's expected to add $15.5m in savings -- which is pretty big. Probably the right move, but be aware there will be "one off" cash costs of $37m, and a further $60m in writedowns... ouch)
Also good to see divvies maintained while net debt reduced.
The narrative seems to be that Dominos is (finally) becoming a a leaner, more profitable business. Maybe it works, maybe it doesn’t. Too early for me to take an interest, but worth keeping an eye on.
Also, this was a great point from Steve which i hadn't ever thought of before:
Separately, they're still managing the vestiges of scale-up mode.
They have pursued significant expansion across Europe and Asia in the last 8 years.
We can see from earlier reports that there are significant efforts underway to implement a shared services approach (more for business support), removing so much of the waste that comes from having the level of regional autonomy that still exists. We've had a group CEO that knows customers and franchises but has had far less experience in scaling up a listed multi-national operation.
Putting two and two together, they probably have a long way to go to realise the synergies and opportunities of scale that come with being their size.
I listened to the whole hour as well, and, understandably, there was no discussion about their internal efforts to consolidate operations across regions and achieve efficiencies with shared services.
I'd like to see more on this from them when they provide their next trading update.
this is one of my "tail" positions that usually cause more trouble than they are worth, sat through the hour call if anyone wants details. about 20% of the Japanese stores to close, those that looked like a good idea in the booming C19 demand. unfortunately, with franchise-based models, poor decisions like this reverse operational leverage big time and that has caused enormous issues that DMP, with a new CEO they are attempting to tackle and ignite a turnaround. A few issues in France as well, the ROW look ok/good.
paying an unfranked dividend and fully underwriting it, i don't understand especially when DMP's covenants still get a mention. when i see this i think some other issues are at play, Hungry Jack Cowin?
anyway good to see that they plan to only open sustainably profitable stores........usually im not big on turnarounds lol