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Domino's Pizza profits eaten up in Germany Domino's Pizza profits eaten up in Germany
(about 9 hours later)
Domino's Pizza has warned that it will not be able deliver a profit at its new operation in Germany until 2016.Domino's Pizza has warned that it will not be able deliver a profit at its new operation in Germany until 2016.
The company said training costs and poor performance at some of its 25 German outlets were to blame.The company said training costs and poor performance at some of its 25 German outlets were to blame.
Britain's largest pizza delivery firm added that plans by the authorities in North Rhine-Westphalia to impose a minimum wage would also hold back its expansion schedule.Britain's largest pizza delivery firm added that plans by the authorities in North Rhine-Westphalia to impose a minimum wage would also hold back its expansion schedule.
Domino's shares fell more than 7% on the news. Domino's shares closed down 5% on the news.
"The German expansion will be a longer and steeper road than originally predicted," the company said."The German expansion will be a longer and steeper road than originally predicted," the company said.
Originally it was hoped that Domino's would breakeven in Germany by 2015.Originally it was hoped that Domino's would breakeven in Germany by 2015.
ExcitedExcited
In an effort to improve the performance of its outlets in Germany, Domino's is in the process of converting its managed stores into franchises, something that will cost the company up to £7m ($7.6m) in the second half of this year.In an effort to improve the performance of its outlets in Germany, Domino's is in the process of converting its managed stores into franchises, something that will cost the company up to £7m ($7.6m) in the second half of this year.
"It is very important we don't send a mixed message here. We are extremely committed to the German plan, we are very excited about Germany," Domino's chief executive Lance Batchelor said."It is very important we don't send a mixed message here. We are extremely committed to the German plan, we are very excited about Germany," Domino's chief executive Lance Batchelor said.
Overall, first half profits at Domino's were 46% lower at £11.6m ($17.7m). But stripping out the numbers from Germany and Switzerland, pre-tax profits were 10.3% higher at £25.7m ($39.3m).Overall, first half profits at Domino's were 46% lower at £11.6m ($17.7m). But stripping out the numbers from Germany and Switzerland, pre-tax profits were 10.3% higher at £25.7m ($39.3m).
Nonetheless, for many analysts the figures served up in Germany remained unappetising.Nonetheless, for many analysts the figures served up in Germany remained unappetising.
"The performance of the German business is of increasing concern. Whilst management highlight German like-for-like sales up 23.8%, at the same time there is a writedown of German assets," Wayne Brown, at brokerage Canaccord Genuity said."The performance of the German business is of increasing concern. Whilst management highlight German like-for-like sales up 23.8%, at the same time there is a writedown of German assets," Wayne Brown, at brokerage Canaccord Genuity said.
Domino's, which makes pizzas such as Pepperoni Passion and Meatilicious in the UK and Ireland, said it would raise the interim dividend on its shares by 7.6%.Domino's, which makes pizzas such as Pepperoni Passion and Meatilicious in the UK and Ireland, said it would raise the interim dividend on its shares by 7.6%.
Domino's bought the master franchises in the UK and Ireland from the US-based Domino's Pizza back in 1993.Domino's bought the master franchises in the UK and Ireland from the US-based Domino's Pizza back in 1993.