Short Interest: Domino's and Greggs (DOM LN; GRG LN)

Takeaway Pizza vs a Bacon sarny: more musings on top 10 UK shorts.

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Dominos Pizza and Greggs are both in the top ten of declared shorts in the UK. Both are dominant in their respective niche, and both have been punished in recent months on the back of weak UK consumer spending. They are both heavily shorted (7 and 6.7% declared shorts respectively). Dominos is trading at 11 year lows, while Greggs is at its lows since Covid. Dominos has a £720m market cap, £360m debt, and 1381 stores (95% franchised) while Greggs is valued at £1.6bn with zero net debt and 2469 shops (ie a value per store of £600,000). Both have historically generated free-cashflow (Greggs approx £80m in 2024, although FCF negative in 2025 so far; Dominos £28m in H1 2025, and £84m in 2024). Both are, or have been, amazingly successful businesses.

So how do these two popular shorts stack up against each other?

Well for starters, Greggs has a larger store footprint in the UK. And it is a walk in shop with limited on demand food prep. On the face of it that would limit expansion opportunities. There is currently one store for every 26,000 people in the UK, with expansion plans shrinking that to 19000 if they add a further 1000 stores or so. Store density is highest in the far north of England, lower in London and the South West, South East and East Anglia. Perhaps the lower density here can be attributed to more “affluent” brands like Pret A Manger (which has 291 stores in London and greater penetration in the South of England (approx 500 stores in total in the UK), and to a lesser extent Itsu which has 47 locations in London and around 80 in total. Gregg’s playful expansion into clothing tie-ins (Primark), pizza and evening opening could suggest a loss of focus and brand identity (away from the core sausage roll/vegan sausage roll products). However, extending revenue opportunities over longer store hours if successful could arguably expand profitability per store. Other plans include expanding into airports and railway stations as well as supermarkets, although the former are well stocked with SSP locations.

So the battleground for Greggs appears to be around whether its new potential 3500 store target is realistic and to what extent they can raise per store cash contribution. We have an idea about per store cash contribution from the 2021 CMD below:

Multiplying that through gives a cash contribution in that year of around £200m (given mix of franchise-non franchise), which is not far off EBITDA (pre-IFRS 16) of £180m that year. This year that pre-IFRS EBITDA is likely to be around £280, which would back solve to approx £122,000 of cash contribution for owned stores and £42,000 for franchises (assuming 2100 owned and 575 franchised stores). Lets then scale this up to the 3500 target (say 2700 owned stores and 800 franchises) at £130k and £45k apiece of shop cash contributions (net of support) and we would get to approx £390m cash contribution before maintenance capex. Deduct £150m of maintenance capex and corporation tax and you get around £190m FCF (pre interest). Thats around 9x today’s market cap but obviously is 6 years away. Lets give them the benefit of dividends in the interim but we can see that a basic NPV capitalising that forecast FCF at 10x in year 6 would suggest the shares are pretty rich:

Even if I’m wrong and Gregg’s total store capacity is closer to 3700, I don’t see the risk reward being that attractive. So the short interest is explainable on the basis of expensive quality/limited growth.

Then we turn to Domino’s. There, it is a different story. There IS more capacity to grow the network of takeaway/delivery outlets: compared to Gregg’s the saturation level isn’t that great. However, the category has become tougher of late: pizza is losing share to other takeaway food categories, and aggregators like Deliveroo and Just Eat are bringing those options to consumers more easily. We have seen rivals Pizza Hut closing stores as it goes into administration (68 diners and 11 takeaway/delivery sites) and 10% of Papa Johns sites will close. In theory that’s good for Domino’s and shows their “fortressing” approach is working (the practice of adding new sites on the radial fringes of existing ones) both defensively and also in terms of the potential to take share vacated by the other two. However, it also points to the stresses within the sector highlighted by Domino’s own poor like for like volume growth figures. Domino’s only does well when its franchisees grow volume (yes sales given the 5.5% royalty, but more volume given it makes most money on its supply of commissary to franchisees). We can see how in 2024 even the most successful franchisees have struggled to deliver like for like volume growth - here’s Full House Restaurant Holdings, Bradley Sheddon’s business where Dominos UK owns a 49% stake:

Less volume = less royalties and less COGS (a good chunk of which is Dominos commissary. Yet Dominos still managed to eek out more money from Sheddon’s company in 2024:

In all Domino’s received £5.2m more from Full House in 2024 than in 2023 (inc dividends) despite volumes being down a little and profits flattish. That might not be a sustainable trend in the future, especially if it is being repeated at other franchisees.

After the jump more on the Domino’s franchisees, and concluding remarks, including why I think Domino’s has a good chance to recover, with more runway than Greggs. Please consider a subscription!