Domino's Pizza interim profit up but shares slide as LFL growth slows

Domino's Pizza reported an increase in first-half pre-tax profit as it continues to see strong online sales growth, but unimpressive like-for-like growth hit the shares on Tuesday.

In the 26 weeks ended 25 June, underlying pre-tax profit rose 9.1% to £44.6m on revenue of £211.3m, up from £176.4m the year before. Online sales - which now make up 75% of total sales - were up 11.5% in the period.

However, investors were left less than impressed with the company's 2.4% like-for-like sales growth, down from 13% growth at existing stores the year before. Domino's pointed out that continued economic uncertainty, a weaker pound and nominal wage growth starting to fall behind rising levels of imported cost inflation are leading to reduced consumer confidence and a squeeze on disposable household income.

"Whilst spending on essentials has held up, discretionary spending has begun to fall, including food out of the home. In this context consumers are being more cautious and value conscious."

The company said its capital expenditure outlook remains at between £50m and £60m for 2017 and it reiterated its medium-term net debt/EBITDA target of 2.15x. In addition, it intends to resume share buybacks shortly, which it said reflects confidence in the long-term commitment to shareholder value.

Chief executive David Wild said: "The first half of 2017 has been another period of good progress for Domino's Pizza Group, despite a more uncertain UK economic environment. The core business delivered strong year-on-year system sales, continuing to take pizza market share, with good like-for-like performance.

"Whilst we acknowledge that our UK consumers are currently more cautious about the economic outlook, we're focussing on growth investment with our franchisees; boosting marketing; improving customer engagement and enhancing our leading position in food delivery. Pizza remains the world's most popular delivered food, and Domino's is the top choice for consumers."

The company opened 40 new stores in the UK during the period and as a result, has raised its expectations from 80 to 90 for this year. Domino's will shortly be opening its 1,000th British unit and said it is well on track to achieve its goal of 1,600.

At 1230 BST, the shares were down 7% to 259.90p.