Domino’s Pizza Group PLC (LON:DOM) has hinted that full-year profits will beat expectations following a strong third quarter performance.
Sales in the three months ended 24 September 2017 climbed 20.8% to £286.4mln (Q3 2016: £237.0mln), with analysts speculating that the recent bad weather helped.
Strong performance both at home and abroad
Even when stripping out the impact of new stores and currency movements, Domino’s still recorded like-for-like growth of almost 12%.
Internationally, the FTSE 250 group enjoyed an impressive few months. In Norway, sales grew 84% aided by the acquisition of Dolly Dimple’s earlier this year, while Switzerland saw sales jump by a little more than a quarter on a constant currency basis.
In total, international system sales soared to £24.8mln from just £3.7mln in the same period last year.
The UK didn’t fare too badly either despite the current political and economic uncertainty, with reported sales in the UK & Ireland rising 12.1% to £261.6mln (Q3 2016: £233.3mln).
Given the “broad-based uplift”, Domino’s told investors that it expects full-year underlying profit before tax to be “at least” in line with current market expectations.
‘Acceleration in digital’
"We are pleased with our performance in Q3, especially the improved trend in our core market of the UK,” said chief executive David Wild.
“Additionally we are making progress in all our overseas operations. In Ireland and Switzerland, our online initiatives are fuelling accelerated growth, and in Norway the first Dolly Dimple's conversions are trading very well.”
Domino’s is starting to see an “acceleration in digital”, with online UK sales jumping 17.4% in the period. They now make up three-quarters of total sales in the region.
In the Republic of Ireland, online sales were up by almost a third and now represent 58% of all sales.
1,000th store opened in UK
Wild added that the new ‘The Official Food of Everything’ ad campaign was partly responsible for the surge, with a record 200,000 online orders – or 140 every minute – placed on the last Saturday of September.
Bricks and mortar is still important for the company though. It opened 19 new stores around the world in the quarter, including its 1,000th in the UK. There are now 1,149 stores across the group and it intends to open a further 90 this year.
Liberum still cautious…
“Q3 LFLs have been strong and we expect there to be some relief in the shares” wrote Liberum analyst Wayne Brown this morning.
“However this is just one quarter and we would urge that a cautious stance should be maintained. There are a number of reasons why this performance could merely be driven by adverse weather and poor comparatives - nothing else has changed in our view.
“The long-term LFL sales trend is clear and we see no abatement to the pressures on franchisee margins.”
He added: “One should also note this performance has been supported in part by the gross margin investment mentioned at the interim results in June. Therefore these LFLs, if to be maintained, could lead to further margin pressure if the Plc decides to continue such a strategy in Q4 and beyond.”
Brown has the stock as a ‘sell’ with a price target of 250p.
Shares surged 9.9% to 332.3p at the opening bell on Tuesday.