Shares in popular casual dining chain Domino’s Pizza (DOM) have jumped over 6% to 316p despite what appears to be an underwhelming update.
In a fourth quarter trading statement for the 13 weeks to 29 December, the firm reported modest growth in its core UK and Republic of Ireland (ROI) market, with reported group systems sales up 3.7% to £352m, driven by reported 4.4% sales growth to £326.7m in UK and ROI.
Thanks to the growth in the division, it expects full year operating profit to be within market expectations of £102.1m to £104.1m.
International sales were down 5% to £25.3m, with a full year operating loss of £20m anticipated for the division.
AJ Bell investment director Russ Mould described today’s share price rise as ‘odd’ given the ‘bad news’ in its latest update.
He said, ‘It has reported a slowdown in the pace of organic growth with fourth quarter sales up 4.1% versus 5.8% in the same period a year ago.
‘Even stripping out the troubled overseas interest shows the UK and Irish operations are experiencing slower sales growth.
‘There is no solid progress with offloading the international operations, it is suffering millions of pounds worth of impairment charges, and net debt guidance has been raised.’
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The firm revealed its international disposals process is ‘progressing’ with its Norway business singled out as a priority, but has yet to agree a deal to sell the business.
Investors had previously reacted positively when Domino's announced in its third quarter update that it was exiting its directly operated international division, which comprises businesses in Norway, Sweden, Switzerland and Iceland, as it conceded that ‘whilst they represent attractive markets, we are not the best owners of these businesses’.
In today’s update the firm said that 'the board’s focus and priority has been on Norway, given the significant operating losses in this market.
‘Once we have agreed a transaction for Norway, we will focus on progressing transactions for our businesses in Sweden, Switzerland and Iceland.
‘We are focused on securing the best possible terms for shareholders and are working closely with Domino’s Pizza Inc throughout. We will update the market in due course.’
Domino’s also provided other updates to its full year guidance, including a slight increase in net debt to £233m, from a range of £220m to £230m previously.