Domino's Pizza reports extra large profits in 2012

Pizza delivery company Domino's has posted a Mighty Meaty 10.8% rise in pre-tax profits to £46.7m in the 53 weeks to 30 December.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013

Domino’s profits

are rising faster than a deep-pan pizza crust, up more than 10% last year. The business has been fattened up nicely by the recession, as consumers trade down from meals out at restaurants, indulging instead in a night of Pepperoni Passion.

In 2012, Domino’s opened 69 new stores, compared with the previous year. That brings the total number of Domino’s outlets to 805 across four countries.

This is no mean feat, given that the fast food industry has never been more competitive. According to the Direct Marketing Association, the average household received 326 pieces of junk mail in 2011, and a vast proportion of these unsolicited flyers were fast food menus. That’s a lot of companies vying to satisfy those late night, lazy, fast food cravings.

Websites – well, fast food aggregators really – like HungryHouse and have also made it easier than ever to find a local takeaway, flogging anything from fried chicken and pho to Tibetan yak’s milk lassis. These sites take a cut of the order value from the businesses they advertise.

Just as insurer Direct Line has opted out of all the price comparison sites, promising consumers ‘the best deal’ if they go direct, Domino’s has pointedly refused to pay for a listing on these sites to avoid denting margins.

Given that it’s one of the oldest takeaway pizza brands operating on the high street, it may not need a third party selling its wares – everyone’s heard of Domino’s. But it has been heavy on vouchers and bogofs all the same.

Rather than rely on these fast-growing takeaway hubs, Domino's has been concentrating on scaling up its own web offering. Sales made through the website increased 46.3% last year to £268.6m, accounting for 55.7% of UK delivered sales in 2012, up from 44.3% in 2011. Its m-commerce technology is also robust. Last year, 19.7% of all online orders were made using a mobile device – probably hungry commuters ordering their dinner on the train home.

‘Despite a very challenging economic environment, our people and our franchisees have delivered another impressive set of results,’ says Domino’s chief executive Lance Batchelor. ‘This performance further demonstrates the resilience of the Domino's Pizza home delivery market.’

However, it’s not all mouth-watering news this morning (and not just because MT accidentally caught sight of Domino’s new – and utterly revolting looking – ‘hotdog stuffed crust’). The business has been hit by the freezing temperatures and heavy snow in the first couple of months of 2013. Nearly 500 stores were forced to close for short periods as staff were unable to make it into work, and the roads were deemed unsafe for scooters. This means that underlying sales for January – usually a decent month for Domino’s as, one by one, new year’s resolutions fall by the wayside – were up just 1.6% in the first seven weeks, compared with 3.8% a year before.

Domino’s’ attempts at grabbing a sizeable slice of market share in Germany and Switzerland have also not been going as well as hoped. Domino’s has stripped these territories out of today’s profit figures, presumably because of the costs associated with acquiring existing franchise rights. But this doesn’t mean that Domino’s is scaling back on its plans for world domination (Domino’sation?). In 2014, Domino’s also plans to move into Austria. And Batchelor reckons that Germany will be in profit by 2015 and will eventually overtake the UK business.

Watch out, Germany. There's probably a bratwurst-stuffed crust coming your way. You have been warned.

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