Sales at UK's Domino's Pizza surge on online demand, lower tax rate

FILE PHOTO: A Domino's pizza delivery person drives a scooter in a residential street, as the spread of the coronavirus disease (COVID-19) continues, in west London, Britain, March 24, 2020. REUTERS/Toby Melville

(Reuters) - Domino's Pizza Group DOM.L said on Thursday it expects to meet market expectations for 2020 profit as a lower value-added tax rate and higher online orders helped it post a 19% jump in third-quarter sales.

The company, a franchise of U.S.-based Domino's Pizza Inc DPZ.N, has also benefited from the reopening of contact-free collections and the return of sporting events.

Domino’s said it expects annual underlying pretax profit to range between 93 million pounds and 98 million pounds, compared with 98.8 million pounds for 2019.

A reduction in the UK’s value-added tax rate to 5% from 20% in July helped Domino’s in controlling costs, which had weighed on the company’s first-half profit as it spent more on cooking and delivering its pizzas safely during the pandemic.

Online sales now account for around 95% of delivery sales in Britain, the United Kingdom’s largest pizza delivery chain said.

The company’s UK and Ireland system sales rose to 342.1 million pounds ($444.90 million) in the quarter ended Sept. 27, from 288.2 million pounds a year earlier.

“At the heart of our future plans is realignment with our franchisee partners and we are having detailed discussions to agree a sustainable way forward,” Chief Executive Officer Dominic Paul said, referring to a profit-sharing row with its franchisees.

Reporting by Yadarisa Shabong and Shanima A in Bengaluru; Editing by Aditya Soni