Lacklustre demand contributes to slump in demand levels for Domino's Pizza

Domino's Pizza has left a bitter taste for investors after revealing a sharp slowdown in UK sales growth amid competition and lacklustre demand for its Winter Survival deal.

Domino's

The pizza delivery chain saw shares plunge as much as 18 per cent after annual results showed like-for-like UK sales rose by 7.5 per cent in 2016 - down around a third on the 11.7 per cent growth seen the previous year.

Fears over the group’s UK market were compounded as Domino’s also said sales growth had slowed even further since, to 1.5 per cent in the first nine weeks of 2017.

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Sales were hit by slower take-up of its Winter Survival offer and as rival Pizza Hut upped the ante with delivery deals.

Domino’s chief executive David Wild said: “I’ve been saying for about a year that this can’t go on. You don’t see businesses of our scale with double-digit sales growth permanently.”

He admitted the group’s Winter Survival deal needed to be refreshed after running for four years.

“Consumers are worried about rising prices - they’ve seen petrol prices go up, food price increases and energy price increases and that’s impacting their spending,” he said.

Recent like-for-like sales were also knocked after the company opened a record 81 stores in 2016, with some launching close to existing outlets. This took around 2.5 per cent off the sales growth seen in the first nine weeks of 2017, according to Domino’s.

Its UK woes took the shine off results showing underlying pre-tax profits rising 17.1 per cent to £85.7 million, with group-wide revenues up 13.8 per cent at £360.6 million.

Douglas Jack, analyst at Peel Hunt, said: “One cannot expect like-for-like sales to grow by double-digits forever or for new stores’ average sales not to contract.

“However, we did not expect like-for-like sales to fall below our 3 per cent forecast.”