Popular casual dining chain Domino’s Pizza (DOM) announced its exit from international markets while delivering solid third quarter revenue growth in the UK and Ireland, where system sales grew by 3.5% to £313.5m. The shares responded with a 5.5% gain to 380.8p.
A six-week review of international operations led management to conclude, ‘whilst they represent attractive markets, we are not the best owners of these businesses’. While some of the rhetoric is clearly aimed at potential buyers, it is refreshing that management has admitted culpability in the execution of the international expansion.
That leaves the UK and Ireland business, which has been under a cloud while the company negotiates with its franchisees over pay-outs.
The company noted that ‘normal working practices continue to be impacted by our franchisee dispute’ but expects a ‘win-win solution’ to eventually emerge.
Despite this disruption and a challenging backdrop in the UK and Ireland the company achieved solid 3.9% revenue growth. Like-for-like UK sales were up 3% while in Ireland they were down 0.7%. Overall the UK accounts for 94% of the combined region’s revenues.
In the 39 weeks to 29 September the company opened 16 stores in the UK and four in Ireland, while closing one UK store, leaving the total estate at 1,172.
ONLINE DRIVING GROWTH
Online sales were very strong, registering growth of 7.2% in the UK and 9.9% in Ireland. Online now accounts for 90.9% of delivery sales and 80.8% of total sales.
The company is in the process of searching for a new chief executive and chairman and is looking to appoint them as quickly as possible.
While exiting the four international businesses may take some time, the simplification of the business and new management should invigorate the UK business and see the resolution of the franchisee dispute.
If there is any truth to the reports about competitor Pizza Express experiencing debt problems, Domino’s is in a good position to benefit.