Domino's Pizza makes lukewarm start to 2017 amid stiffer competition

Domino's Pizza served up a tasty looking set of final results for last year but the shares were sliced down to size due to the lukewarm start made to 2017.

After growing like-for-like sales 7.5% in the 52 weeks to 25 December, the company reported LFL sales growth of just 1.5% in the UK for the first nine weeks of the new financial year.

Analysts said the slowdown from 4.8% LFL in Q4 reflects the strong comparative period last year, slower take-up of its 'Winter Survival deal', stiffer competition from Pizza Hut and some market softness amid the consumer spending dip.

Having opened 11 outlets already, during the whole of 2017 Domino's expects to open around 80 new stores in the UK, and has begun investing in extra supply chain centres to meet its long-term store target of 1,600 UK stores and 76 stores in the Republic of Ireland.

For 2016, the group generated revenue of £361m, up 14% on the previous year, as the UK and ROI business sold 94m pizzas in the year, averaging over 257,000 per day.

Profit before tax rose 17% to £86.2m and underlying basic earnings per share 15.6% to 13.8p

With the recommending of a final dividend of 4.5p, the total dividend swelled 16% year on year to 8.0p, which was all in line with consensus forecasts.

After a record year for system sales, which also included a major investment to transform activities in Germany as well as a new partnership in the Nordics, chief executive David Wild said Switzerland was now seeing encouraging signs with the business profitable at EBITDA level.

"We are very happy with the new store opening programme, in particular the average sales per address of these stores. We continue to exploit the opportunities of new technology to the full, with online orders now being the source of over 71.5% of our total system sales."

He added: "The strength of the core business and international investments gives us the ability to build for the future."

Domino's also announced it has acquired Dolly Dimple's in Norway for £4m and will increase its stakes in its Nordic JVs to a controlling share ahead of schedule, further demonstrating its commitment to this area.

The house broker has forecast £416.2m sales, £93.8m PBT and 15.24p EPS for 2017, based on LFL sales recovering to 4% for the year.

"We remain comfortable with our LFL assumption," said Numis, which is implicitly 4.5% LFL for the rest of the year due to the slow start, as comparatives from last year become easier in the second half.

Rival broker N+1 Singer said it will review its forecasts but was working off a 3.5% LFL assumption "and do not envisage any notable changes".