29th Jan 2019 08:33
LONDON (Alliance News) - Domino's Pizza Group PLC on Tuesday reduced its annual profit expectations following a weak performance of its International unit in the final quarter of 2018.
The stock was down 8.9% at 249.45 pence in early trading in London.
The FTSE 250-listed firm said it now expects underlying pretax profit to be at the lower end of the consensus range of GBP93.9 million and GBP98.2 million. In 2017, Domino's reported underlying pretax profit of GBP96.2 million, so the lower end of the range would represent a 2.4% decline in annual profit.
In mid-October, the company expected to deliver underlying pretax profit for 2018 in the middle of the then range of market expectations of between GBP93.0 million and GBP99.6 million.
The pizza delivery chain said its system sales were GBP339.5 million in the 13 weeks to the end of December 2018, up 5.5% from GBP321.8 million reported for the same period in 2017.
UK & Republic of Ireland system sales improved by 6.2% to GBP312.9 million during the period, but International system sales were down 2.0% to GBP26.6 million year-on-year.
In the UK, system sales rose 6.0%, with Online sales up 11%. The growth was helped by the Strictly Come Dancing Final, which took place on December 15, the company said, when sales were up 25% compared to the same day the prior year.
Domino's highlighted that it sold a record number of pizzas the Friday before Christmas, helped by its ongoing product innovation, including increasingly popular 'cheeseburger' pizza.
Turning to Domino's International business, the company said it continues to be "weather-affected" and will have suffered a loss of between GBP3 million and GBP4 million in 2018.
"Our international businesses offer significant long term potential, but we have experienced growing pains this year, particularly in Norway, where we have faced business integration challenges," said Chief Executive David Wild.
Domino's acquired Norwegian rival Dolly Dimple's in March 2017 and planned to integrate it with the stores it already owned in the Nordic country. The company operates 49 stores in Norway of which 34 under the Domino's brand. System sales growth in local currency from the Domino's chain was 48% in the final quarter of 2018, but like-for-like performance was down by 6.4% year-on-year.
Switzerland recorded constant currency system sales decline of 0.6% in the final quarter, hurt by the temporary closure of Domino's busiest store due to fire damage.
In Iceland and Sweden, constant currency system sales were up 1.5% and 35%, respectively, in the quarter on year, following the opening of two stores in each region, taking the total to 25 stores and nine stores, respectively.
Looking ahead, the company said it expects continued growth in the UK and Republic of Ireland in 2019, helped by new store openings.
In its international business, Domino's said it plans to invest in central functions and infrastructure to support much bigger businesses.
"While this will have an impact on overall profitability in the short term, we are confident of the long term opportunities these markets offer. At this early stage we expect International to break even in 2019," the company said in its statement Tuesday.
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