Domino’s (DOM) is benefitting from more people staying home and ordering in while watching the likes of X Factor, helping it beat pre-tax profit expectations.
The pizza delivery chain says full year underlying pre-tax profit is expected to slightly beat market expectations.
The impressive performance was driven by a strong fourth quarter with good volume growth offsetting its digital investment.
DOMINO'S HAS THE X FACTOR
In the UK, like-for-like sales growth was 6.1%, beating consensus of 4.7%. The X Factor final on 2 December marked Domino’s biggest day of sales in 2017 as more people tucked into takeaways while watching TV.
On this day alone, sales were up by 25% compared to the average Saturday.
Other big events this year such as the FIFA World Cup in Russia could provide a further fillip.
Domino’s is also tapping into a shift in people ordering online. Online UK sales increased 14.5% year-on-year, representing 77% of system sales in the fourth quarter of 2017.
DEPARTURE FROM SLOWER UK GROWTH
Shares in the pizza delivery chain are up 2.7% to 359.9p as the trading update implies the business is shrugging off sluggish UK growth.
In 2017 Domino’s was on the back foot as concerns around intense competition, increased price discounting and a weak consumer backdrop weighed on its outlook.
A key risk is that the company’s new store rollout could cannibalise sales, but this is yet to materialise.
In 2017, the UK store rollout accelerated with 95 stores opening, exceeding a target of 90.
Stockbroker Numis analyst Richard Stuber says Domino’s price promotions and marketing campaigns are paying off. He increases his pre-tax profit forecast by 3% in the year to 31 December 2017 and by 1% in 2018.
