Dominos Pizza Group reports robust Q1 trading despite major VAT hike

Domino's Pizza Group plc has issueed a trading update for the 13-week period from 27 December 2021 to 27 March 2022.

Q1 trading was strong, aided by the group's first national price campaign for several years, made possible because of the resolution with our franchisees. Excluding the impact of the increase in the VAT rate, like-for-like system sales, excluding splits, grew by 3.9%.

Total orders grew 5.5% in the quarter despite a strong comparative quarter last year when there were strict lockdown restrictions in the UK. Collections, which is the company's most efficient channel from a labour perspective, have continued their recovery and grew 45.4% in the quarter, and across the quarter were at 95% of 2019 levels.

As expected, given the lockdown comparator, delivery orders were 4.5% lower than the prior year. Pleasingly active customer growth continued its momentum and increased 4% compared to the same period last year.

For Q1 FY22 the VAT rate on hot takeaway food was 12.5% compared to 5% in Q1 FY21. If the sales price to the consumer were to have been unchanged then the VAT rate increase would effectively deliver a reduced system sales value compared to the same quarter last year, which flows through to like-for-like system sales performance.

Consequently, as a result of the higher rate of VAT in the quarter, UK & Ireland system sales were £365.9m, down 1.5% on the first quarter of last year. Excluding the impact of the increase in the VAT rate, system sales increased 4.9% in the quarter. Like-for-like system sales, excluding splits, were down 2.4%, again reflecting the higher rate of VAT in the quarter.

So far this year. the firm has opened 9 new stores by 7 different Franchisees, and remain on track to open at least 45 new stores this year, which would represent a c.4% increase in its stores vs. the 2021 year-end store count of 1,227.

CEO Dominic Paul commented, “We have momentum in the business with growth in order count and customer numbers, and are continuing to work closely with our Franchisees following our resolution late last year. Our first national price campaign in a number of years has been a great example of what we can achieve when we work together.

“Our ambition is to consolidate our position as the nation’s favourite pizza brand and believe the time is now right to see whether we can reach an even broader customer base. On this basis, we have also commenced a trial which will enable customers in a small number of locations across the UK and Ireland to order Domino’s via the Just Eat platform but delivered by Domino’s drivers, making the most of our unrivalled network of best-in-class delivery drivers.

“It’s no secret that inflation is a key challenge for everyone at the moment and the current consumer environment is challenging, but our scale and integrated supply chain, as demonstrated in the covid downturn, mean Domino’s is well-placed to navigate the current conditions. What’s more, at a time when family budgets are under pressure, Domino’s remains an affordable treat everyone can enjoy, and we’re redoubling our focus on offering our customers the best possible value this year.

“We remain focused on accelerating the sustainable growth of the system, and working together with our franchisees to deliver a better future through food people love.”