Domino's Pizza sticking with expansion plans

Wed Mar 28, 2012 11:21am BST

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LONDON, March 28 - Domino's Pizza UK & IRL (DOM.L), Britain's biggest pizza delivery company, said it will press ahead with expansion plans in 2012 as it benefits from cash-strapped consumers eating its pizzas in their homes rather than dining out.

The company on Wednesday reported a 3.5 percent rise in first-quarter like-for-like sales at its 660 established stores, and said it was sticking to plans to open 72 new stores in 2012, including a dozen in Germany.

Domino's, which operates the British and Irish franchises of the global delivery brand, was helped by a recovery in Ireland, where sales rose 1.7 percent after a 10.5 percent fall in the same quarter last year.

Like-for-like sales in Britain rose 3.6 percent, compared to 5.5 percent in the first quarter of 2011.

The company has performed well in Britain during the economic downturn as consumers shun eating out and instead order in from its range of pizzas.

But Domino's had found trading in Ireland tougher, after the former "Celtic Tiger" economy suffered the deepest recession in the industrialised world following the bursting of a housing bubble since 2007.

"Although they are just part of the growth story, it is good to see our like-for-like sales continue to increase," said Domino's new chief executive Lance Batchelor, who took up the role late last year.

"It is especially pleasing to see sales in the Republic of Ireland return to positive territory."

Domino's reported growth in its online business in the first quarter, with a 44.5 percent increase in total online sales to 59.3 million pounds ($94.7 million).

"The really interesting thing about this is that the company have now delivered 51 percent of (UK) orders online and that's up from 43 percent for whole of 2011 so their online presence is really accelerating," said Paul Hickman, an analyst at Peel Hunt.

NEW OPENINGS

"We may have a softer comparative for the second quarter of the year but we will not be taking our foot off the accelerator," Batchelor said.

"We have a number of marketing initiatives and other programmes aimed at ensuring our franchisees can profitably grow their businesses."

The chain added six stores in the first quarter and is confident it will achieve its target of 72 new stores in 2012, of which 12 will be in Germany.

The company opened six stores in Germany in 2011, and plans a further 26 outlets by the end of 2013, with a view to growing the business to as much as twice the size of its British operation.

Shares in Domino's were down 3.78 percent at 454 pence at 1008 GMT, having risen 6 percent since the beginning of March to close at 472 pence on Tuesday.

"We've seen it accelerate recently. It's just taking out some of those gains," said Peel Hunt's Hickman, who has a hold rating on the stock and a 480 pence price target.

"Domino's is an absolutely firm medium-term buy but to be a short-term buy they need to bring some of their medium-term opportunities into the short-term and actually show an increase in the earnings rate."

($1 = 0.6263 British pounds)

(Editing by Hans-Juergen Peters)

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