UK and Ireland boom for Domino's as international ops struggle

Domino’s Pizza Group updated the market on its fourth quarter trading on Tuesday, reporting a 5.5% uplift in group system sales to £339.5m year-on-year, or a 5.8% improvement on an organic basis.

The FTSE 250 company, which holds a master franchise to the US-based Domino’s Pizza brand in the UK, Ireland, Germany, Switzerland, Liechtenstein and Luxembourg, said system sales in the UK and the Republic of Ireland were 6.2% higher at £312.9m.

Like-for-like sales were ahead 4.5% in the UK and 7.5% in the Republic of Ireland.

In the UK, Domino’s said it saw its “busiest week ever” in the run-up to Christmas, adding that it achieved “strong” digital performance, with online sales up 10.8%.

Outside of the British Isles, international system sales fell 2%, but grew 1.6% on an organic basis, finishing the quarter at £26.6m.

The group boasted a total of 1,261 stores group-wide at period end, having opened 25 new stores in the quarter.

For the 2018 year as a whole, 59 stores opened in the UK and the Republic of Ireland, creating more than 2,000 jobs.

Domino’s Pizza Group said “strong” performance in the UK and Ireland was offset by weaker international sales progress and business integration challenges in Norway.

Full-year underlying profit before tax was now expected to be at the lower end of the consensus range of between £93.9m and £98.2m.

Looking ahead, the board said the UK delivered food market was expected to be worth £9.3bn by 2022, for a compound annual growth rate of 8%.

Domino's said it aimed to maintain its market share over that period.

The potential for 1,600 stores in the UK was reaffirmed, which the board said would provide “attractive” returns for both Domino's shareholders and franchisees.

Its 2019 store pipeline was reportedly looking similar to 2018 at the same time last year.

Domino’s Pizza Group said it was looking at continued UK and Republic of Ireland growth, with increased investment in its international operations meaning a “breakeven” result was expected.

“I'm pleased with the continued strong performance in the UK and Ireland, where we opened a further 59 stores,” said Domino’s Pizza Group chief executive officer David Wild.

“Many families decided to kick off the festive season with a Domino's, with the Friday before Christmas breaking all records as we sold more than 535,000 pizzas - equivalent to 12 every second.”

Wild said the international businesses offered “significant” long term potential, but it had experienced growing pains during the year, particularly in Norway, where the firm faced business integration challenges.

Looking ahead, he said the group would invest further in robust teams and infrastructure in its newer markets, to create a “solid platform” for profitable growth.

“The UK delivered food market is vibrant and we estimate that it will grow at a compound rate of 8% a year to 2022,” Wild explained.

“We aim to maintain our share of this market, thanks to over 30 years of experience in delivery, a leading brand, great-tasting pizza and superior franchisees.”