Domino's Says Overseas Ops Will Slice Into Profit
Domino's Pizza has warned that a slowdown in overseas markets will dent its 2018 underlying pre-tax profit.
The company said it expects a 2018 loss of £3 million to £4 million 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 Officer David Wild said.
Domino's said it plans to invest in 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 the Dolly Dimple stores it acquired 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 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. The popularity of the company's cheeseburger pizza fuelled record sales of more than 535,000 pizzas on the Friday before Christmas.
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 pretax profit was previously expected to be between £93.9 million and £98.2 million, the company said.
It reported underlying pretax profit of £96.2 million in 2017.