Berenberg lowers target price on Dominos following 'disappointing' first half

Analysts at Berenberg lowered their target price on Domino's Pizza on Thursday, saying that several issues that had plagued the group during the first half of last year had returned to the fore.

Berenberg, which maintained its 'hold' rating on Domino's, said the group's UK like-for-like sales growth of 5.9% had been relatively subdued in the second quarter and noted that the company's relationship with its franchisees appeared to have "become challenging again" and "unlikely to improve in the near term", slowing the rate of store openings "for some time" unless the firm was capable of absorbing more costs for franchisees.

However, Berenberg noted that England's recent performance in the FIFA World Cup and, more recently, the end of the heatwave seen across much of the UK "should support Q3 performance".

In addition, the broker stated that Domino's overseas division, which made an unexpected loss, had also turned in a "disappointing" first half, bringing up memories of its previous struggles at generating profit in Germany.

"As such, we think the outlook for Domino's is increasingly uncertain," said Berenberg.

"However, given the shares have fallen substantially in recent weeks and are now trading close to their lowest multiple for several years, we maintain our 'hold' rating."