Domino’s shares down as international prospects go cold
Written by News on 07/05/2019
Investors lost their appetite in Domino’s Pizza after it warned its struggling overseas business would remain in the red this year.
Shares fell by as much as 11% after the dwindling prospects for the group’s international operations overshadowed another quarter of sales growth in its main UK and Ireland market.
Chief executive David Wild said that after the “disappointing” performance for the international division – which includes Switzerland, Iceland, Norway and Sweden – it no longer expected that part of the business to break even this year.
Shares in the delivery company largely recovered from their steep early losses to close only 1.5% lower but they are still off by 12% for the year to date.
Domino’s reported a 3.1% rise in like-for-like sales in the UK for the first quarter, but only thanks to a rise in prices as the volume of pizzas sold declined.
Sales fell in Switzerland, Iceland and Norway.
Meanwhile, the number of UK store openings in the period slowed and Mr Wild said Domino’s was in “ongoing dialogue” with UK franchisees, some of whom are in dispute with the company.
A group called Domino’s Franchise Association UK & Ireland is demanding more support in the face of rising costs and also says Domino’s is asking them to open more stores in existing locations, which is affecting their profits.
Russ Mould, investment director at AJ Bell, said Domino’s had “reached saturation point in its core UK market”, putting the onus on the overseas operation to deliver growth.
He added: “Despite having access to a strong brand, there is no guarantee of success in markets with significant differences from the UK in terms of their culinary culture.
“And Domino’s is rowing back on a previous pledge to break-even with this part of the group in 2019.
“Even here in the UK, there are signs of diminishing appetite for its offerings with the volume of orders slipping and like-for-like sales only held up by price increases which are unlikely to be sustainable longer term.
“Then there is the issue of its deteriorating relationship with its franchisees which is likely to constrain any expansion plans on these shores.”
Domino’s Pizza – which owns the franchise to operate the brand in the UK and Ireland and parts of Europe – is separate from the US Domino’s business.
(c) Sky News 2019: Domino’s shares down as international prospects go cold
