Domino’s Pizza Group shares jumped on Monday after the takeaway firm moved to reassure investors with a fresh share buyback programme worth £20million.
FTSE 250-listed Domino’s, the UK master franchise of the international brand, slashed profit guidance last month as it flagged weaker consumer demand and higher costs.
Domino’s chief executive Andrew Rennie said the group is planning to hike prices to help offset a sharp rise in labour costs resulting from wage increases and higher employer national insurance contributions.
Its share price has fallen by nearly a third since the start of the year in response.
Domino’s on Monday lined up a £20million share buyback programme it said would enable the group ‘to take advantage of the opportunity to purchase shares in meaningful size at current share price levels generating attractive returns for shareholders.’
Domino’s Pizza Group shares jumped 4.6 per cent to 204.2p in early trading, taking one-year losses to around 30.1 per cent.
Weaker demand and higher staffing costs have weighed on Domino’s profits this year
Domino’s, which will review the buyback programme later in the year, will buy a maximum of 39,471,274 shares.
The group said ‘The directors of DPG remain confident in the prospects for DPG’s highly cash generative, resilient and market-leading business, with a robust financial position and its strategy to create shareholder value which is underpinned by its existing capital allocation framework.’
Analysts at Peel Hunt currently hold a buy rating on Domino’s shares with a target price of 350p.
The broker said in a note on Monday it believes like-for-like sales ‘will pick up next year’, helped by the full roll out of a previously announced loyalty programme, the men’s Fifa World Cup, and ‘soft weather comps’.
Analysts at Shore Capital are less bullish with a hold rating.
Shore Capital said: ‘Despite the low valuations, we downgraded our recommendation to Hold following the interim results due to concerns about slow trading and macroeconomic backdrop headwinds.
‘We would like to see evidence of like-for-like sales improving over H2 and margin pressures easing before turning more positive.’
Domino’s shares have fallen by around a third since the start of the year
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