Domino's ROI And UK System Sales Increased By 18.7% In Q3 2020
Domino's Pizza has released a trading update for the 13 weeks to September 27, 2020, revealing that its Republic of Ireland and UK system sales increased by 18.7% year-on-year during the period to £342.1 million.
Domino's Republic of Ireland system sales increased by 3.1% in local currency and 3.6% on a reported basis during the period, while its UK system sales increased by 19.6%, with the UK accounting for 95.1% of Domino's total Republic of Ireland and UK system sales during the period.
Republic of Ireland like-for-like growth, excluding stores in split territories, was 2% in local currency, and 1.5% including splits, while UK like-for-like growth, excluding stores in split territories, was 18.3%, and 17.3% including splits.
On July 15, the UK government changed the rate of VAT on hot takeaway food from 20% to 5%. Domino's said that this change both helped franchisees mitigate costs and enabled them to pass savings on to their customers. For the weeks following the rate change, the VAT reduction benefitted UK reported system sales and like-for-like sales growth, however, Domino's said that it has limited direct benefit to its profitability.
There was no VAT rate change for hot food in the Republic of Ireland, and therefore the reported like-for-like growth is unaffected.
On an including splits basis, Republic of Ireland and UK orders were down 6%, with 11.8% growth in delivery orders being more than offset by a 41.5% decline in collection orders.
Average item price was up 12.6%, affected by the VAT change, which skews these figures, Domino's said.
CEO Dominic Paul stated, "I am pleased to report a strong performance in Q3. Delivery orders were up 11.8% and we also benefitted from the reopening of our collection business. I am delighted by the agility the group and our franchisees have demonstrated in order to maintain our momentum. We welcome the UK government's reduction to VAT in mid-July, which helped franchisees mitigate costs and gave them the opportunity to pass savings on to customers.
"Working closely with our franchisees, we continue to do everything we can to keep our people and customers safe, including wearing masks, the use of Perspex screens, contact free delivery and collection, and continued menu rationalisation. It is a privilege to stay open and serve our local communities, and we are confident that we have operational plans in place to adapt to different levels of lockdown that may arise in the coming months. I would like to say a huge thank you to the Domino's teams across our system for their dedication and hard work.
"We continue to work on a long-term strategic plan for the business. 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, although we continue to expect that these discussions will take some time. Despite the ongoing uncertain backdrop, we expect to report full year underlying group [pre-tax profit] in the range of £93 million to £98 million, in line with market consensus."
© 2020 Hospitality Ireland – your source for the latest industry news. Article by Dave Simpson. Click subscribe to sign up for the Hospitality Ireland print edition.