Domino's Pizza Group shares drop after UK like-for-like sales for 2017 miss analyst expectations

 
Shruti Tripathi Chopra
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Craig Birchall, a Domino's Pizza franchi
Domino's sold nearly 89m pizzas last year (Source: Getty)

Domino's Pizza Group saw its share slide over 15 per cent this morning after reporting lower-than-expected like-for-like sales in the UK for the first nine weeks of 2017.

The figures

Sales at Britain's biggest pizza delivery firm's stores open for about two years rose 1.5 per cent during the period, much lower than the 10.5 per cent increase posted in the same period a year ago.

Revenues did not meet analyst expectations despite rising 13.8 per cent to hit £360.6m last year.

Underlying profit before tax was slightly better than expected at £85.7m, a 17.1 per cent rise from 2015.

Analysts blamed competition from rivals like Pizza Hut and the poor performance of its "Winter Survival" promotion campaign.

The pizza giant, which sold nearly 89m pizzas last year, recommended a final dividend of 8p per share. This was nearly 16 per cent higher than its 2015 payout.

At the time of writing, shares dipped over 15.9 per cent to 62.9p.

Why it's interesting

Domino's share price took a dip despite it buying Norwegian pizza chain Dolly Dimple's from Norges Gruppen for £4m through its associate Pizza Pizza Norway.

The pizza chain is facing fierce competition from online players like Just Eat, which saw orders rising 42 per cent to 136.4m, from 96.2m in 2015.

What Domino's said

Commenting on the results, chief executive officer David Wild, said: “2016 was another successful year for Domino’s Pizza Group and this performance is reflected in today’s financial results. The UK delivered strong year-on-year growth due to robust like-for-like sales and the opening of 81 new stores. This performance, combined with our tight control of costs, has generated a significant rise in profits and a dividend payment of 8p per share. Our cash conversion remains very strong and we have reinvested through International expansion and returned cash to shareholders through dividends and share buy-backs.

“We remain confident in the resilience and long-term potential of our business model and are committed to continue to invest with our franchisees for growth. We expect to open at least 80 new stores in the UK with further footprint expansion in all our overseas operations."

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