Bad weather has historically been a key sales driver for Domino's Pizza (DOM) as consumers seek refuge inside their homes and order takeaway food. Yet the £866 million cap has today blamed snow for a poor start to 2013. Analysts are downgrading earnings forecasts which has dragged the shares down 1.4% to 530p.

The company insists that underlying trading is better than the results suggest, particularly as the period under analysis does not include the full benefits of the half-term holiday which was included in last year's comparative period. Chief financial officer Lee Ginsberg says that half-term trading has been 'fantastic' and he remains confident about healthy demand for the group's pizzas.

Domino's has historically enjoyed a boost in sales during rainy periods. January's frequent snow showers were too much for the pizza specialist, it now seems. 'Light snow is good, that kind of snow (experienced in January) was too much,' says Ginsberg. He reveals that the central food preparation units – known as a 'commissary' – made its usual deliveries to the stores, but the franchisees couldn't reach their customers.

'Whilst the statement highlights adverse weather as a key reason for this slowdown, past experience would suggest that snow has played to the strengths of the Domino’s model,' says Canaccord Genuity analyst Wayne Brown.

Domino's Ginsberg says it is wrong to look at such a short reporting period (the latest trading update covers the first seven weeks of 2013), as any weather disruption tends to be 'evened out' over the year.

Domino's results for 2012 saw pre-tax profit (before one-off items) rise 10.8% to £46.7 million. This lagged the pace of system sales (up 12.8% to £598.6 million) due to losses in Germany and Switzerland.

The group's overseas expansion is surpassing the company's expectations. It is opening more stores in Germany than originally planned. It now has 18 sites and will double this number in 2013. This comes at a cost, as Domino's had to install senior management to run operations and now has to train staff to fill the new stores. Therefore 2013 will be another year of losses from Germany.

Yet it is easy to see why management are excited about the opportunities. One of the new German corporate stores is doing €18,000 a week in sales. This is even better than a new store in the UK would normally achieve in its early days.

The Switzerland business was acquired in August 2012. Ginsberg describes the operation as a 'poor estate of 12 stores' when they were acquired but says they are trading better than expected. Domino's will refit and relocate a number of stores during 2013. It also needs to open one store in Austria before the end of 2014 in order to exercise an option it has on the region. It will this year investigate the market and better understand the demographics before opening said store.

Analysts reckons the shares are fully valued given the lack of earnings upgrades following today's results. Canaccord Genuity has a 'hold' rating and 500p price target.

Issue Date: 25 Feb 2013