Domino's Pizza Group has opened fewer stores than expected this year as franchisees remain "cautious" due to higher labour costs following the Government's latest budget. The pizza delivery chain warned it would miss its original profit guidance as consumer sentiment weakens.
The company joins other high street hospitality firms struggling with "tougher" market conditions, with Greggs also reporting pressure on customer demand last month. Domino's shares plunged 19.4% to 198.2p in early trading on Tuesday following the announcement.
Sales growth hits obstacles
The pizza chain, which operates 1,381 stores across the UK and Ireland, said sales growth has been impacted by "weak" consumer confidence in recent months. Andrew Rennie, chief executive of Domino's, acknowledged the challenging environment facing both the company and its franchisees.
"There's no getting away from the fact that the market has become tougher both for us and our franchisees, and that's meant that the positive performance across the first four months didn't continue into May and June," Rennie said. He cited weaker consumer confidence, increased employment costs and uncertainty ahead of the autumn statement as key factors.
Store openings fall short
Domino's has opened just 11 new stores so far this year and expects overall openings in the "mid-20s" for this financial year. The company had previously said it expected to open "in excess of 50 new stores" this year.
The group described this as a "short-term slowdown" in new stores but stressed that it expects openings to pick up again next year. Franchisees are taking a more cautious approach to store openings due to the current market conditions.
Profit warnings issued
Domino's warned shareholders that it expects to deliver earnings between £130 million and £140 million for the year. This falls short of previous market expectations of between £140.8 million and £149.7 million.
The business revealed that system sales grew 1.3% to £777.8 million for the 26 weeks to June 29. However, like-for-like sales were 0.1% lower for the half-year, as a positive first quarter was offset by a 0.7% decline in the second quarter when delivery orders "weakened".
The group added that "softer" trading improved towards the end of July, offering some hope for recovery in the coming months.
(PA) Note: This article has been edited with the help of Artificial Intelligence.
