Domino’s Pizza shares fall on sales expansion snag

Domino’s Pizza shares fall on sales expansion snag

Domino’s Pizza warned that a slowdown in overseas markets would dent its 2018 underlying pre-tax profit, sending shares in the pizza delivery firm lower.

Domino’s shares, which lost nearly a third of their value in 2018, fell 7% in the latest session, valuing the business at £1.27bn (€1.46bn).

It said it expects a 2018 loss of between £3m (€3.4m) and £4m in its overseas business after fourth-quarter sales in a number of markets were hurt by unseasonably warm and dry weather and business integration challenges in Norway.

“Our international businesses offer significant long- term potential, but we have experienced growing pains this year, particularly in Norway,” chief executive David Wild said.

Domino’s said it plans to invest in continental Europe but added that the move would hit profitability in the short term. Sales in its international markets fell 2% in the fourth quarter.

Domino’s has been focusing on its online and overseas businesses but has struggled to control in-store costs, especially in Norway, where it is converting Dolly Dimple stores bought in 2017.

The company said it expects its international operations, which includes countries such as Germany and Luxembourg, to break even in 2019.

Domino’s Pizza shares fall on sales expansion snag

“Domino’s has never ever made international work, it has never made any money, and there comes a time when shareholders have to ask what are they ever going to get back for all the investment, which runs into hundreds of millions of pounds,” Liberum analyst Wayne Brown told Reuters.

Sales at UK stores open for over a year rose at a stronger-than-expected 4.5% during the fourth quarter.

Growth came despite restaurant chains in Britain facing higher expenses from a rise in the national living wage and food costs and a slowdown in consumer spending due to uncertainty about Brexit.

Domino’s is scheduled to report its full-year earnings on March 12.

Underlying pre-tax profit was previously expected to be between £93.9m and £98.2m, the company said. It reported an underlying pre-tax profit of £96.2m in 2017.

Reuters

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