Fresh store launches at Domino's have fallen short of projections as its franchise partners grapple with diminished profitability amid challenging market conditions.
A mere 11 outlets have opened their doors so far this year, with full-year launches anticipated to reach the mid-twenties as franchise operators grow "cautious... given increased employment costs," Domino's revealed.
The company added "Having faced a 10 per cent minimum wage increase [last year], our franchise partners faced a further significant labour cost increase [this year]... as a result, franchise partner profitability declined," as reported by .
Total sales at Domino's climbed 1.3 per cent to £777.8m during the 26 weeks ending June 29, whilst revenue advanced 1.4 per cent to £331.5m.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) tumbled 7.4 per cent to £63.9m, whilst underlying profit before tax plummeted 14.8 per cent to £43.7m.
The firm anticipates underlying EBITDA for the complete year to land between £130m and £140m, representing a 7.5 per cent downward revision from earlier forecasts.
Difficult market conditions
Chief executive Andrew Rennie acknowledged that the market landscape has grown "more difficult".
"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.
"Given weaker consumer confidence, increased employment costs and uncertainty ahead of the Autumn Statement, franchisees are taking a more cautious approach to store openings for the time being," he said.
Peel Hunt has given Domino's a 'buy' rating but has reduced its target share price for the company to 450p.
"Despite a challenging market backdrop, Domino's continues to consolidate its market leadership... However, system sales and order count growth decelerated in [the second quarter] amid consumer weakness.
"Operationally, the loyalty programme trial is progressing well with a 2026 rollout planned, and supply chain automation initiatives remain on track to deliver further efficiencies. While trading conditions remain tough, Domino's is actively investing in strategic growth areas."
