Strong New Year sales and Easter has helped pizza delivery chain Domino’s (DOM) deliver 7% like-for-like sales growth in the 13 weeks to 1 April.

This is a decent performance compared to 4.8% like-for-like sales growth in the 53 weeks to 31 December when consumers tightened their purse strings and Pizza Hut stepped up its competitive efforts.

Hungry customers are increasingly ordering pizza through Domino’s website and app. UK online sales jumped 16.2% year-on-year, representing 78.9% of system sales over the first quarter.

Overseas, Switzerland was the standout performer with like-for-like sales growth of 12% thanks to successful promotions and strong online momentum.

CAN DOMINO’S KEEP DELIVERING?

Canaccord Genuity analyst Nigel Parson is optimistic about the stronger trading despite acknowledging the period a year earlier was not a tough act to follow, and is confident this can continue.

Parson says population growth and the tendency for customers to keep eating pizza as they grow older should drive over 5% UK like-for-like sales growth over the medium term.

He is encouraged by the company’s focus on converting occasional users to regulars instead of rewarding loyal customers through schemes and promotions.

WHY LIBERUM REMAINS UNCONVINCED

Liberum’s Wayne Brown remains bearish, arguing franchisees could slow down the rate of openings drastically to focus on cash generation and margins to rebuild their balance sheets.

The analyst believes the number of new store openings will slow if they do not deliver reasonable returns, which has already started to happen.

Back in March, Domino’s announced it will open between 65 and 75 stores this year instead of 80.

Brown is also concerned the pizza delivery firm is cannibalising sales by opening too many branches in specific areas, forecasting a 10-year payback for a new split store.

AJ Bell investment director Russ Mould says: 'It's fair to say that Domino's first quarter results were almost guaranteed to be good. Prolonged spells of bad weather and the bonus addition of Easter happening in March provided the recipe for strong demand for takeaway food.

'The news has helped to lift the shares to a 12-month high. However, we're only talking about three months' trading which is not enough to silence the ever-increasing numbers of critics of the business.'

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Issue Date: 26 Apr 2018