Domino’s Pizza Third Quarter Sales Slow Down Despite Olympics

Domino’s Pizza Third Quarter Sales Slow Down Despite Olympics

Britain’s largest pizza chain, Domino’s Pizza Group PLC (LON:DOM), reported a 3.7 percent increase in the like-for-like UK sales during the third quarter, ending September 23. It is down from an 8.1 percent growth in the second quarter this year, and 4.1 percent in Q3 last year.

Domino's Pizza Third Quarter Sales Slow Down Despite Olympics

“The degree of the [sales] slowdown will come as a surprise, especially as this period should have seen a benefit from the Olympics,” said Wayne Brown, an analyst at Canaccord Genuity. A possible reason is that the company’s advertising expenditure in Q3 this year is 43 percent less than in the same period last year.

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Despite slow growth, Domino’s is confident it will see an improvement in the fourth quarter revenues. Lance Batchelor, the chief executive said, “We approach the fourth quarter, traditionally our strongest trading period, with continued optimism and determination. We are confident of meeting City consensus earnings for the full year.” Increases in sales during the fourth quarter are pretty normal, as people order more pizzas during cold nights.

Domino’s Pizza Group PLC (LON:DOM) opened 11 stores during the third quarter in the UK, taking the year-to-date total to 34 stores. The pizza chain has planned to open 60 new stores in the UK and 12 stores in Germany this year. Domino’s sales have grown steadily at an average of 10 percent since 2002, one of the best track records in the food industry. The rapid growth is slowing now, so Domino’s is looking for opportunities in less saturated markets.

Domino’s Pizza Group PLC (LON:DOM) has agreed to acquire rights to enter the Swiss market for 7 million Swiss francs. It already has rights to expand in Luxembourg and Liechtenstein. Another good sign is that online orders contributed 58 percent of the company’s total sales in the last quarter, recording an annual growth rate of 39.3 percent.

Stephen Anderson, a senior analyst for the restaurant business at Miller Tabak & Co., has maintained a buy rating with a price target of $39. Miller Tabak & Co. expects the new pan pizza to drive sales growth for several quarters. Yesterday, Domino’s launched a new pan pizza in the US, where it has 4,900 stores. The US pan pizza market is estimated to be worth $7 billion.

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