Domino’s sold more than 535,000 pizzas in the UK on the Friday before Christmas – equivalent to 12 a second over a 12-hour trading day – but a weaker international performance has forced the company to slice its profit guidance.
The strong run-up to Christmas helped group sales to rise by 5.5% year on year to £339.5m in the 13 weeks to 30 December, it said in a trading update published on Tuesday. Sales growth was driven by its Republic of Ireland operations, where like-for-like sales rose by 7.5%.
Domino’s particularly benefited from days when Britons had reason for a big night in. It credited the final of the BBC’s Strictly Come Dancing on Saturday 15 December for a new online record, with sales up by a quarter compared to the same day the year before.
The overall sales record came on the Friday before Christmas, 21 December, the day traditionally known as “Mad Friday” or “Black Eye Friday” for revellers getting into the festive party spirit. Though the record Domino’s sales that day suggests people may be staying home more now.
However, the FTSE 250-listed company’s efforts to expand to new markets after fast UK growth stumbled during the quarter. International sales fell by 2% year on year to £26.6m.
David Wild, the Domino’s Pizza Group chief executive officer, said the international operation had experienced growing pains this year.
The company suffered “business integration challenges” in Norway in particular, he said. Sales also fell in Switzerland and Iceland.
The weaker international performance prompted Domino’s to guide that its full-year underlying profit before tax will be at the lower end of analysts’ expectations of between £93.9m and £98.2m. The company also said that investment in central functions would dent short-term profitability.
Shares in Domino’s fell by almost 7% on Tuesday to 255p. The company’s shares were worth more than 380p as recently as June, before the international struggles dented summer profits.
Domino’s, originally an American brand, opened its first UK outlet in 1985, before the British and Irish franchise was bought out in 1993.
The company sold almost 90m pizzas last year in the UK, but its addition of 59 stores during the year to the more than 1,200 it already ran was significantly below its plans at the start of the year.
On Tuesday Domino’s reaffirmed its long-term target of 1,600 stores in the UK, but did not give guidance on how many it expects to add in the coming year, prompting some concerns among City analysts.
Domino’s also continues to face pressure from franchisees for an increased share of profits, which some investors believe could weigh on future growth in the UK.
Competition is increasing rapidly in food delivery, with Domino’s facing pressure from companies such as Just Eat, Deliveroo and Uber Eats, all of which enable rival pizza restaurants to offer home delivery. However, Domino’s is betting that its brand and record of profitability will enable it to fend off some of its newer competitors, many of which are still loss-making.
Wild said: “The UK delivered food market is vibrant and we estimate that it will grow at a compound rate of 8% a year to 2022. We aim to maintain our share of this market.”
Source: The Guardian