Domino’s profits fall as people order fewer takeaways
Domino’s Pizza Group has said it has opened fewer stores than expected as its franchisees have been “cautious” due to higher labour costs linked to the Government’s last budget.
The pizza delivery specialist warned it would miss its original profit guidance for the year as it also highlighted “weaker” sentiment among consumers, causing shares to plunge in early trading.
It is among high street hospitality firms to have cautioned over “tougher” market conditions recently, with Greggs also reporting pressure on customer demand last month.
On Tuesday, the pizza chain – which has 1,381 stores in the UK and Ireland – said sales growth has been impacted by “weak” consumer confidence in recent months.
Andrew Rennie, chief executive of Domino’s, said: “There’s no getting away from the fact that the market has become tougher both for us and our franchisees, and that’s meant that the positive performance across the first four months didn’t continue into May and June.
“Given weaker consumer confidence, increased employment costs and uncertainty ahead of the autumn statement, franchisees are taking a more cautious approach to store openings for the time being.”
It said this has caused a “short-term slowdown” in new stores but stressed that it expects this to pick up again next year.
Domino’s has opened 11 new stores so far this year and expects overall openings in the “mid-20s” this financial year.
The company had previously said it expected to open “in excess of 50 new stores” this year.
It came as the group also warned that profits would miss previous guidance due to weaker trading.
Domino’s told shareholders that it expects to deliver earnings between £130 million and £140 million for the year.
It had previously said it was due to meet market expectations of between £140.8 million and £149.7 million.
It came as the business revealed that system sales grew 1.3 per cent to £777.8 million for the 26 weeks to June 29.
Like-for-like sales were 0.1 per cent lower for the half-year, as a positive first quarter was offset by a 0.7 per cent decline in the second quarter, when delivery orders “weakened”.
The group added that “softer” trading improved towards the end of July.
Mr Rennie stressed that “weakness” in consumer sentiment has weighed on the whole sector, highlighting that the firm has continued to grow market share despite recent pressure.
He also highlighted that franchisees are keen for certainty over the Government’s next budget as they assess investment plans for the year ahead.
He told the PA news agency: “Our franchisees are mainly concerned about uncertainty ahead of the upcoming budget.
“We want to see stability so that we, and our franchisees, can be confident in our investment plans.
“We don’t want to see an increase in the quantum of costs on small businesses because you have to make these sustainable to support any growth agenda.”
Shares in Domino’s Pizza Group fell by 19.4 per cent to 198.2p in early trading on Tuesday.
