Domino's spot on to cash in on poor weather

Jul 24 2007 By John Revill, Business Staff

Delivery chain Domino's Pizza said it was "well-placed" for the year after wet weather and successful product launches boosted sales.

The group, which serves a network of 470 franchises in UK and Ireland, said profits before tax increased 35 per cent to £8.3 million in the 26 weeks to July 1, fuelling confidence that it will exceed profit hopes for the full year.

The six-month period included the company's second most successful launch on record, following the debut of the "Meateor" pizza, while a Simpsons-themed pizza and two new side orders also drove up average ticket sales from £12 to £12.50.

Domino's faced tough comparisons because of the World Cup in 2006, but cooler temperatures and increased rainfall meant like-for-like sales from 404 stores open for more than year were up 14.9 per cent on a year earlier.

Altium Securities said Domino's appeared to be "firing on all cylinders". It raised its profit forecasts for the third time this year, meaning Altium now expects a figure of around £17.5 million.

Domino's said the internet now accounted for 14.3 per cent of all its delivered pizza sales in the UK, following a 42 per cent increase in first half e-commerce sales to £13.6 million.

Overall sales increased 24.0 per cent to £142.5 million in the 26 weeks to July 1, while the company's revenues which includes income generated from royalties, fees, food sales and rental income as well as a small element of revenues from corporately-owned and operated stores, grew by 22.3 per cent to £55.2 million.

Online sales were supported by more aggressive marketing, including promotion of the online service within its sponsorship of The Simpsons on Sky One.

This was instead of direct product advertising after media regulator Ofcom introduced restrictions on the advertising of food and drink to children.

Domino's opened 20 new stores in the first half, but this was below target because of difficulties in securing planning consents. It now expects to open between 40 and 45 sites this year, compared with the 50 anticipated.

Chris Moore, deputy chief executive of Domino's, said the company's expansion drive continued to be aggravated because of factors out of their control like planning.

The company had already taken its total in the Birmingham area to 33, with new sites added in Hall Green and Aldridge.

Additional sites were also planned in Leamington Spa, Bromsgrove, and Wolverhampton, with expansion in the Midlands a key priority with an ultimate target of 45 sites.

The company had benefited from particularly strong like for like sales growth, with more new customers and existing customers buying pizzas, Mr Moore said.

"We have done a lot of work with our website, making offers available for the first time, and search engines so we can be be found more easily. But we have also had great results from sending out snail mail."

The company had also benefited from increasing the speed of delivering pizza, with average delivery times down by four to five minutes to 23 to 24 minutes.

This had been done with displays showing the times achieved by neighbouring stores.

Mr Moore said: "If you are ordering food, the time it takes to reach you is critical. After 30 minutes hunger can turn to anger."

Mr Moore added: "The period has been very good. We have benefited from the wet weather - anything which keeps people at home is good for us and this May and June were among the wettest on record.

"This was counterbalanced by the very warm April, where our sales suffered when people got their barbecues out.

"But is just too much at the moment. We have had to close temporarily some of our sites and the flooding makes our operation difficult."