LONDON, July 3 Britain's Domino's Pizza
warned that annual losses at its fledgling German business would
be higher than anticipated due to increased training costs and a
poor performance at some of its stores, sending its shares down
Britain's biggest pizza delivery firm said on Wednesday it
expected losses for the year at its two-year-old German arm to
be between 2 million and 3 million pounds more than first
thought, taking the total anticipated loss to as much as 6
million pounds, according to analysts.
"The group's German expansion has hit its first speed bump,"
Panmure Gordon analyst Simon French said in a note, as he cut
his full-year pretax profit forecast for the group by 4 percent
to 47.5 million pounds ($72 million) to reflect the higher
Shares in the firm, which opened on Wednesday up 29 percent
on a year ago, were down 7.4 percent to 619 pence at 0919 GMT,
one of the top FTSE 250 fallers.
Reporting on trading for the 13 weeks to June 30, Domino's
said like-for-like sales at its six German stores open for more
than a year rose 11 percent in the period, representing a big
slowdown from growth of 40 percent in its first quarter.
Of the 25 stores now in Germany, the stores it manages
directly were significantly underperforming those run by
franchisees and would be switched to a franchised model "as soon
as practicable", it said.
"It is time to drive our German expansion using our tried
and tested franchise model," Domino's chief executive Lance
Batchelor said. "We are excited about the future in this
Domino's has previously said the German business could
eventually outgrow its core British arm, which owns the master
franchise to own and operate the Domino's brand in the UK,
Ireland and other European countries.
It has said it expects its German business to be profitable
by the end of 2015 and will open another 12 stores in Germany in
the second half of this year.
The higher anticipated losses took the shine off a better
than expected performance in the UK, where the firm has over 700
stores. Like-for-like sales rose 6.1 percent in the second
quarter, boosted by new promotions and growing online sales.