Domino’s Pizza (DOM) has reported a surge in profits as cash-strapped consumers shun dining out in favour of dialling a takeaway.
The pizza delivery firm, which operates a network of franchises, said half-year pretax profits were up 32.7 per cent to £10.9 million and like-for-like sales were 11.4 per cent ahead.
Domino’s, which earlier this year made the move from Aim to the main market, said fixed contracts and higher retail prices had shielded it from food and energy price inflation. The company added it was hopeful it would be able to manage most cost pressures by improvements in its procurement processes, but warned further “modest” price increases were likely early next year.
Domino’s Pizza chairman Stephen Hemsley said: “We are on track to open 50 new stores this year and although we are mindful of the very strong comparatives in the second half of the year, we are confident of further strong growth in system sales and profits and are well placed to exceed market expectations for the year.”
Domino’s said it had achieved the increase in sales despite “a significantly tougher trading environment” as more customers trade down to ordering in takeaways.
Mr Hemsley said: “Once these consumers have decided to stay at home, Domino’s has the opportunity to serve them and with the combination of a great product, excellent service and effective marketing, we have achieved record levels of system sales in the first half of the year.”
Domino’s said it was seeing a shift in the socio-economic profile of its customers, echoing the so-called Aldi effects as hard-pressed consumers trade down to cheaper alternatives.
“We’ve definitely seen more customers using our delivery service,” said Domino’s finance director Lee Ginsberg. “We’ve picked up more customers in the first half of the year, of which 19 per cent are in the ‘A and B’ bandings.
“They also tend to be higher spending, on average between £20 and £25 a ticket,” he added.
The average ticket price at Domino’s is currently about £15. But Mr Ginsberg said the more typical Domino’s customer - those in the socio-economic C, D and E bandings - appear to be tightening their belts.
“Some of these customers are spending less frequently,” said Mr Ginsberg. “While the group tends to do well when the economy and household budgets are under pressure, we would not want to see any large-scale unemployment.
“That would not be good for us,” he said.
The firm also said its sponsorship of ITV’s flagship show Britain’s Got Talent had been an “excellent association” both in terms of sales generation as well as raising overall awareness of the brand.
Domino’s opened 25 new stores in the 26 weeks to 29 June, bringing its current total to 526 stores and it plans to increase its estate to 1,000 by 2017.
Online orders now represent 21.8 per cent of Domino’s delivered pizza sales in the UK, up 85.1 per cent to £25.3 million, from £13.7 million in 2007.
Stockbrokers Numis Securities said the half-year results were “impressive” and upgraded its 2008 full year pretax estimate by £200,000 to £22.3 million.
“If the current trading momentum continues, then we see further scope for upgrades in both 2008 and 2009,” the broker added.
For 2009, Numis is currently forecasting profits of £25 million.
Domino’s holds the master franchise to own, operate and franchise Domino’s Pizza stores in the UK and Ireland, with the majority of its outlets owned by franchisees. Its first UK store opened in 1985 and the first Irish store opened in 1991.