By MoneyMorning.com.au
Back in February, Kris alerted you to the idea of lazy investing. He said:
‘Let’s be honest. If you could find a way of making a lot of money without doing anything, odds are you’d jump at it.’
In the fast food sector, Kris reckoned he’d found ‘…three of the laziest – potentially – moneymaking stocks on the market.’
Since Domino’s Pizza Enterprises Ltd [ASX: DMP] announced a 23% increase in net profit, the pizza chain’s share price is up 14% in one month…
How many Aussie businesses have a share price that looks almost unaffected since the GFC?
The chart looks especially good when compared to other companies in the Consumer Services sector. Look at how franchisee owner Retail Food Group and the recently listed Collins Food Limited, a fast food operator has performed…
Neither company looks like a great investment based on these charts alone.
And this is why Domino’s could be an investor’s dream in years to come.
At the time of the profit announcement, the head of Domino’s Pizza said ‘Australia has the highest labour rates in the Domino’s world of 70 countries.’
According to the director of Restaurant and Caterers Association, Greg Parkes, Australia’s labour costs account for 44% of total business costs. Compare that to other countries where total wages account for 30% or under of business costs.
Despite the wage expenses, Domino’s still managed to report a $12.6 million net profit for the start of the financial year. Overall, the company had grown Australian revenue by 8.7%. And if you’re holding the stock, you’ll get a 13-cent dividend.
Seeing as the company is turning a profit, shouldn’t it just shut up about high labour costs and accept they’re a fact of life when operating a business in Australia?
Nope. By alerting the public to the fact that labour accounts for almost 50% of business costs, the company is telling its investors what could erode future profits. And before they let profits slide, the company will do everything it can to protect them.
In fact, Domino’s is doing everything it can to lower the cost of wages.
Already it’s implemented automated phone ordering systems. And it’s created an efficient process to order pizza over the Internet.
And in keeping up with the tech generation, there’s even an ‘app’ to order pizza on your mobile phone!
In less than six months, Domino’s management reckons digital sales will account for 50% of all orders.
Based on that, it’ll come as no surprise to you that Domino’s holds almost 50% of the pizza business in Australia.
In tough economic conditions, the company is getting creative to keep profits high and keep their hold on the Australian market.
If you’re an investor, Domino’s is the sort of company you should add to your watch list.
Shae Smith
Editor, Money Morning
From the Archives…
The Stock Market Financial Winter is Coming
2012-03-02 – Dan Denning
Why You’ll Want to Watch This ‘Bad’ Retail Stock Very Closely
2012-03-01 – Kris Sayce
Higher Oil Prices – Government Guaranteed
2012-02-29 – Dr. Alex Cowie
Asymmetric and Economic Warfare with Iran
2012-02-28 – Dan Denning
Why the Greek Debt Crisis Has Nothing to Do With the Euro
2012-02-27 – Nick Hubble
Domino’s: A Surprising New Way to Profit From Mobile Technology