Bad weather hampers Domino's Pizza after strong 2012

LONDON Mon Feb 25, 2013 10:14am GMT

A Domino's Pizza is pictured in its box in central London, February 15, 2009. REUTERS/Luke MacGregor

A Domino's Pizza is pictured in its box in central London, February 15, 2009.

Credit: Reuters/Luke MacGregor

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LONDON (Reuters) - Domino's Pizza (DOM.L), Britain's biggest pizza delivery firm, said heavy snow hit its UK sales at the start of 2013, after surging online demand helped to lift annual profit 11 percent.

The firm, which operates the British, Irish and German franchises of the global delivery brand, said on Monday pretax profit for the year to December 30 was 46.7 million pounds ($71 million), up 10.8 percent on 2011, and in line with forecasts.

Domino's promotions and popular online ordering service have struck a chord with cash-strapped British consumers opting for cheaper nights in over more expensive meals out.

Store openings, online demand, new stuffed-crust products and a busy summer of sporting events all helped sales at UK shops open more than a year rise 5.0 percent in 2012, up from 3.7 percent growth a year earlier, the firm said.

Group sales rose 13 percent to 598.6 million pounds.

Domino's said online sales now made up 55.7 percent of UK delivered sales, up from 44.3 percent the year before. Almost 20 percent of those orders came via mobile devices, it added, with demand in general being driven by more targeted marketing on social media forums like Facebook and Twitter.

"We are almost a digital business now," Chief Financial Officer Lee Ginsberg told Reuters, adding that in one recent week a dozen of its stores had received over 80 percent of their delivered sales online.

Bad weather and heavy snow had hit progress at the start of 2013, the firm said, with 498 UK stores forced to close at some point during the first seven weeks of the year.

School holidays also took place later this year compared with 2012, slowing underlying UK sales growth to 1.6 percent in the period, compared with a 3.8 percent rise in 2012.

Shares in firm, which upped its dividend by 16.2 percent to 7.90 pence, were down 1.5 percent to 529.75 pence at 0923 GMT.

"We are not troubled by the slow start to the current year, given that it is only seven weeks and the recent snow has clearly had an impact," analysts at Peel Hunt said, adding they liked the firm's international expansion strategy.

The group, which opened a record 69 shops in 2012 to take it to 805 stores, has been expanding in Europe, acquiring franchise rights to operate in Germany, Switzerland, Luxembourg and Liechtenstein. It also has an option to open in Austria in 2014.

Long term, Domino's sees its German business growing to twice the size of its British arm and said on Monday it would double the number of stores there this year to 36, as well as adding another 60 in the UK. It expects to be profitable in Germany by the end of 2015.

The group said some German stores in D├╝sseldorf and Cologne had been making 18,000 euros a week recently, well ahead of its expectations and better than the 5,000 pounds its UK stores were making at the same early stage.

"There's a resonance with our consumer out there that we are getting things right," Ginsberg said.

($1 = 0.6551 British pounds)

(Reporting by Neil Maidment; Editing by Rhys Jones and Mark Potter)

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