Pizza delivery firm DP Poland Plc (LON:DPP) is on track to open its fiftieth store next month as it continues its drive towards to critical mass.
The AIM-quoted company, which has the exclusive right to operate the Domino’s Pizza brand in Poland, now has 48 stores in the eastern European country after opening 13 over the past 9 months or so.
Three more are currently under construction with at least two of those expected to open in October.
“We are on track to cross the 50 stores mark in October, as we drive towards the critical mass that will support national television advertising and further economies of scale in procurement,” said chief executive Peter Shaw.
New store openings drive first half sale growth
New store openings were partially responsible for yet another jump in sales in the first half of 2017, during which DPP notched up its 18th and 19th consecutive quarters of total sales growth.
Total system sales, which include the ten new stores opened in the first half, increased by 50% year-on-year to PLN27mln (£4.4mln) (H1 2016: PLN18mln) for the six months to 30 June.
READ: DPP’s momentum shows no sign of stopping as H1 sales soar
It wasn’t just the new stores that contributed to the growth either; like-for-like sales rose by 17% compared to the same period last year.
“New store openings in combination with robust like-for-like sales growth increased System Sales by 50% in the first half of 2017,” said Shaw.
“The twin sales streams of corporate stores and commissary delivered an increase in combined corporate store EBITDA and commissary variable profit of 39%.
“As our newest stores' sales build and they move into profitability we will see a further uplift in this figure.”
As is common for a rapidly expanding company, DPP saw its pre-tax loss widen to £1.08mln (H1 2016: £0.94mln).
“Step change” in underlying earnings in 2018
DPP told investors that full-year underlying earnings (EBITDA) should show a “modest improvement” compared to 2016.
It achieved 20+% like-for-like sales growth in July and August (the first two months of the second half), aided by a “robust” Polish economy and recent investment into its marketing strategies.
But a new commissary in Łódź, which opened in August and gives DPP the capacity to supply up to 150 stores with fresh ingredients, along with other fixed costs is expected to dampen the impact of higher sales this year.
As a result, the firm expects the real “step change” in underlying earnings to come next year as stores continue to mature and build sales.
“We expect to see a step change improvement in group EBITDA in 2018 as more corporate stores mature, new stores become a smaller proportion of the whole and the contribution from our commissaries continues to grow,” said CEO Shaw.
The company said it has a pipeline of store openings already in place for the next 18 months or so.
It has an intermediate target of 100 stores but reckons further down the line Poland could support at least 300 stores.