Domino’s Pizza has warned over losses in its international arm and said it remains locked in discussions with UK franchisees amid an escalating row.
The pizza delivery company said it saw a “disappointing” performance in its international business, with “weak” system sales across all its overseas markets – down 2% on a reported basis to £25.1 million overall in the division.
Shares fell more than 6% as the group warned that it no longer expects to break even in the international business over the full year.
Sales fell as much as 8.4% in Switzerland. Its international operations also include chains across Iceland, Norway and Sweden.
It is now looking at cutting costs in its overseas arm, including looking at hours worked by staff, as well as its international head office operations.
Domino’s chief executive David Wild said: “Internationally, performance remains disappointing and trading visibility is limited.”
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He added: “Given persistently weak system sales in all our international markets, we no longer expect this part of our business to break even this year.
“We are therefore further tightening our focus on international costs and capital deployment.”
In the UK, Domino’s reported a 3.1% rise in UK like-for-like sales for the 13 weeks to March 31 against a “challenging” market backdrop.
The chain said like-for-like orders by volume fell 2.7% in the UK, but this was offset by a 5.1% hike in prices.
Online sales lifted 8.5%.
It confirmed that store openings continue to be hit by the ongoing dispute with disgruntled store operators.
The group opened four new stores in the first quarter – compared with nine opened in the same period a year earlier.
Mr Wild said the group remains in an “open and ongoing dialogue” with its UK franchisees.
Domino’s is working to resolve a dispute with store operators, who have set up a group called Domino’s Franchise Association UK & Ireland, demanding more support from the company in the face of rising costs.
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They also say Domino’s has asked them to open stores in existing locations, which they claim is affecting their profits.
He denied the group was in a stalemate with franchisees over the issue, but stressed the firm was “trying to find solutions that benefit both of us, rather than a loss of profit for us in order to boost profits for franchisees”.
Last month, Domino’s signalled that it was preparing for a change at the top as it revealed it was considering succession planning for Mr Wild and chairman Stephen Hemsley.
Mr Wild remained tight-lipped on the succession plans or timing, saying it is “what good boards do”.
Asked if he would still be in the role in a year’s time, he said: “I hope so.”
Steve Clayton, fund manager of the Hargreaves Lansdown Select funds, said: “Domino’s are struggling to make their international businesses fire on all cylinders.
“It is disappointing to see them losing ground in almost all of the areas that the group operates, outside of the UK and Ireland.”
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By Holly Williams
Source: Yahoo Finance UK