Record profits but Domino's sales flounder in snow
Tuesday 26 February 2013
The City went cool on Domino's Pizza even as it posted record annual profits yesterday, as its more recent sales succumbed to the snow that hit the UK last month.
The company, which shifts 61 million pizzas a year, including the top-selling Pepperoni Passion, saw 498 of its stores closed at some point, representing almost two-thirds of its UK network.
The sponsor of Splash!, the celebrity diving programme fronted by the Olympic bronze medallist Tom Daley, saw its shares marked down 12p to 525.5p.
"In terms of the first seven weeks, there was a snow disruption for two of those weeks, which were very hard," the chief executive, Lance Batchelor, said.
He also blamed an earlier half-term holiday 12 months ago for much tougher trading comparisons for Domino's in the early weeks of this year. Sales at stores open for more than a year were up just 1.6 per cent, compared with 3.8 per cent a year earlier.
Analysts warned that the tough start made the company's prospects more difficult in a year which is already lacking several one-off boosts that made for a bumper 2012.
Pre-tax profits rose 10.8 per cent to a new high of £46.7m in the year to 30 December.
"Trading in 2012 benefited from Euro 2012, the London Olympics and the wettest summer for 100 years," Simon French, an analyst at Panmure Gordon, said. "Without these tailwinds, this year we expect like-for-like sales growth to be subdued at 3 per cent, although this may prove a challenge given the start to the year."
Domino's is now generating 60 per cent of its orders online, which is good news for the group as digital customers tend to place bigger orders. It said one store had even removed the phone number from its menus without suffering any decline in sales.
Despite concerns over rising food prices, Domino's has used its growing buying power to keep a tight rein on costs over the past year, limiting cost inflation to 2 per cent during a period when wheat prices have jumped 40 per cent, according to Mr Batchelor.
"Rather than being a victim of commodity prices we are proactively managing it," he said.
The company has almost 800 stores in the UK and Ireland, although it believes there is room for 1,200, and is eyeing an expansion of its fledgling German business, which currently has 18 outlets.
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