Some better trading news from Domino’s this morning. After a difficult first half when UK LFL sales softened to a flat showing, the Q3 update reveals a UK LFL showing of 6%. We were anticipating a 3-4% showing. This pick up was partly supported by a softer 3.9% comp, favourable weather and a more effective marketing campaign. Total UK sales were up 12.1% and group system sales ahead by 20.8%. Commentary on new store additions and the Nordics/Switzerland is reassuring also. Management is signalling a full year outcome “at least in line with market expectations” which should be taken favourably. The shares have been firm coming into today’s update in anticipation of a good update and we expect them to react favourably given the metrics and tenor are better than anticipated. Using consensus forecasts the shares trade on a FY18 P/E of 20x with a c.3% yield. We see scope for the rating to nudge up given the company seems to be overcoming the H1 setback.
