Domino’s sees costs take a bite out of profits

Domino’s Pizza has reported a slump in half-year profits after taking a hit from soaring costs despite raising prices for franchisees and introducing a delivery fee.

The UK pizza delivery chain reported a 16.3% drop in underlying pre-tax profits to £50.9 million for the six months to June 26.

This comes in spite of moves to offset rising ingredient prices and other cost pressures, including the launch in March of a delivery fee of between 99p and £2.50.

The company said it increased prices for its franchisees but this was on a “lagged basis”, meaning that the full benefit will not be felt until the final six months of the year.

The group is expecting profits to be weighted towards the end of the year and kept its full-year guidance unchanged.

Domino’s said it is boosting marketing spend “significantly” to attract more customers, having seen like-for-like sales excluding so-called split territories drop 6.4% due to the increase in the VAT rate.

Outgoing chief executive Dominic Paul said: “We will be increasing our media spend in the second half compared to the first half, amplifying our value message to customers as we head into key events such as the men’s football World Cup.

“We are also continuing to acquire new customers by expanding our trial with Just Eat following positive initial results.”

He added: “Domino’s scale and integrated supply chain are always key to our success.

“As inflation accelerates and consumer budgets tighten, these differentiators are more important than ever.”

Mr Paul recently announced plans to leave in December to head up Premier Inn owner Whitbread.

Domino’s is searching for his replacement.

The figures come after the company recently ended a long-running dispute with its franchise partners.

As part of the deal unveiled in December, the group said it had agreed to invest £20 million over the next three years, with franchise owners agreeing to increase the speed of new store openings.

It also recently completed an exit from all directly operated international markets to focus on the UK and Ireland.