Numis reiterates 'buy' on Dominos Pizza

Numis reiterated a ‘buy’ rating and target price of 446p on Domino’s Pizza after the company reported a third quarter trading update.

In a trading update for 27 June to 25 September, Domino’s said trading in the core UK business was strong, driven by continued investment in its digital platform and supported by the 21 new stores opened in the period, which brought the total year-to-date to 51.

It reported an 11.5% jump in system sales to £237m, with sales in the UK up 10.5% to £220.9m. Sales in the Republic of Ireland were up 7.6% to €14.9m, with sales in Switzerland 16.7% higher at CHF4.8m.

The group said Ireland benefited from the increasing trend towards digital ordering and the growing economy, while in Switzerland, the growth in sales came despite being unable to offer carry-out due to a local licensing issue in two stores.

Domino’s said the comparatives remain challenging, but the continued strong sales performance means it is confident its forecast full-year results will be in line with market expectations.

“The combination of high returns (asset-light), clear growth roadmap, and leading e-commerce platform (c.81% of UK delivered sales are ordered online) makes this a key sector pick,” Numis said.

Numis said it is raising 2016 and 2017 pre-tax profit forecasts by 1% and 3% respectively, reflecting the higher base store count.

Shares fell 3.60% to 359.30p at 1031 BST.