Domino’s showing signs of slowdown as pizza chain warns UK casual dining sector still under pressure

Delivery chain sold a total of 8.2m pizzas in the UK throughout the World Cup

The chain has reduced its target for new store openings this year (Domino's)

Domino’s has warned that uncertainty in the UK market poses a risk to the company amid pressure on the casual dining sector in general, despite sales jumping 13 per cent in the first half, helped by a big World Cup boost.

Shares in the group dropped more than 10 per cent in morning trading on Tuesday.

The pizza delivery chain reported pre-tax profit of £42m for the 26 weeks to 1 July, down from £46m in the same period of 2017.

Sales in the UK and Ireland rose 8 per cent, from £523m to £565m, while group sales climbed to £617m from £547m.

The World Cup helped propel sales, with a bump of 86 per cent the day England played its semi-final against Croatia. The company said it sold a total of 8.2m pizzas in the UK throughout the tournament.

However, the recent hot weather saw sales fall back somewhat, the company said, and uncertainty in the UK market also affected the business.

The company said: “Consumers' disposable incomes are flat, and operators in the casual dining sector continue to experience inflationary pressures from the national living wage, food costs and business rates.”

A number of so-called casual dining chains have fallen into financial difficulties since the beginning of the year, with Hummus Brothers, burger chain Byron, Jamie’s Italian, Strada, and Prezzo among some of the high street brands shedding jobs and shutting branches.

Domino's said it “remains well placed to thrive in this market”, due to a combination “scale, brand, value proposition and service”.

Emma-Lou Montgomery, associate director at Fidelity Personal Investing, said: “In a competitive and price-sensitive market (Domino’s) needs to keep on top of costs and be seen to offer value-for-money.”

Ms Montgomery noted that the chain is showing “visible signs of a slowdown as its number of planned store openings has been sliced”.

The company said it now expects to open 60 new UK stores this year, having previously targeted up to 75 new branches, and added: “The slowdown in our expected rate of growth reflects an expansion strategy that is increasingly focused on the development of smaller and medium-sized franchisees, where we see strong demand for store openings.”

Steve Clayton, manager at Hargreaves Lansdown, said: “Overall, Domino’s are on track, because a stronger than expected UK performance is covering up the weak execution internationally.

“The core UK business is a gem... Domino’s challenge is now to replicate their success at home internationally and for now, the jury is still out.”

Domino’s chief executive officer David Wild said it had taken some time to “refine the operating model and cost base at store level” throughout the international business, “particularly in Norway”.

“We are confident that the changes we have made will result in a better performance in H2, and believe that these businesses offer significant long term growth potential as we export our expertise in digital, supply chain and franchisee management,” he added.