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Domino’s sells more pizza – especially online – but company growth held back by international operations

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Domino’s sells more pizza – especially online – but company growth held back by international operations

Domino’s Pizza saw its UK sales grow in 2019 – especially online. But its loss-making international operations, now being sold off, held back its overall performance. Its debt levels grew as it stockpiled for Brexit and it has contingency plans in place against the coronavirus.

 

Multichannel strategy

Most sales (81.8%) now take place online, and online sales grew by 8.8% during the year. Some 91.1% of sales that were then delivered were made over the internet. Not all were delivered, with a 5.3% rise in the number being collected from shops.

 

The retailer is now investing £10m in new platforms for both ecommerce and for apps as it looks to boost the customer experience from a platform that can deliver improvements more quickly and flexibly. Its new app is set to be trialled in the autumn.

While Domino’s is largely a franchise business, it now operates 36 London shops directly after opening two during the year. These, it says, are a good place to test new innovations and develop its operational expertise. Revenue from these shops came in at £32.1m – up by 18.5%, or 1.3% on a like-for-like business that strips out the effect of store, and business, openings and closures.

 

Brexit and coronavirus

The business said that its year-end net debt was more than £30m higher at £232.6m than it had been at the start of the year (£203.3m) thanks to Brexit-related ‘stockbuilding’. Looking to the future, interim chairman Ian Bull said, in today’s full-year statement: “The external environment hasn’t been easy and, whilst parts of the UK and Ireland may become less cautious having formally left the EU, much remains uncertain as we go through the transition year.” Meanwhile, he said, the potential impact of the Covid-19 coronavirus was hard to determine since the situation continued to evolve. “We are monitoring this closely, and have established contingency plans,” it said.

 

The business was hit when its chief financial officer, David Bauernfeind, died in a Boxing Day accident. Before that happened, chief executive David Wild had said that he planned to retire, while chairman Stephen Hemsley had decided to step down. Domino’s is now recruiting to fill the roles of chair and CFO. The new chair will then oversee the recruitment of a new chief executive.

 

Nonetheless, Bull concluded: “Against this backdrop and despite the challenges ahead, the LFL growth achieved in the UK in 2019, the growth opportunities ahead, the strength of the brand and the exceptional capabilities of our franchisee partners give me confidence that our future will be a bright one.”

 

The financials

The update came as Domino’s Pizza reported sales of £1.2bn in the year to December 29 2019. That’s 4.8% up on the previous year. UK like-for-like sales – which strip out the effect of store and business openings and closures – grew by 3.7% during the year. That’s down from 4.6% a year earlier.

 

Pre-tax profits were down across a variety of measures. Pre-tax profits from continuing operations came in at £71.1m, down by 13.8% from the same time a year earlier. The retailer is selling its international businesses in Norway, Sweden, Switzerland and Iceland, with a buyer announced last month for the Norwegian business. Losses from discontinued operations widened by 103.2% to £56.5m during the year. Pre-tax profits from both continuing and discontinued operations came in at £2.8m, down by 93.6% from £43.9m last time.

 

Domino’s Pizza chief executive David Wild said: “Our core UK and Ireland business continues to deliver a solid trading result, with UK like-for-like sales up 3.7%. Our digital capabilities continue to fuel this growth, with online sales up 8.8%. Collection also saw a good performance, up 5.3%, and this remains a significant opportunity for us going forward. I would like to thank my colleagues across all our markets, together with our franchisee partners, for their continued hard work and passion for the Domino’s brand.

 

“In February we were pleased to announce a disposal of our Norwegian business which is subject to shareholder approval, and we expect this to complete by the end of May. We continue to prioritise transactions for our remaining International businesses, although expect that these may take some time as we ensure that we find the best owners for these businesses.”

 

Image courtesy of Domino’s Pizza

 

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