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Domino's Pizza Shares Fall, Company Reports Discouraging Profits Due To Rising Overseas Costs

Domino's Pizza Shares Fall, Company Reports Discouraging Profits Due To Rising Overseas Costs
Shares of Domino’s Pizza Group dropped to a eleven month low after the company reported an almost 10 per cent fall in pre-tax profit for the first half of the current fiscal year primarily because of increasing costs of overseas operations particularly in Norway, despite the firm reporting an increase in sales.
The focus of the company in recent years has been on increasing its online and overseas businesses. However, it has been unable to cope up with the increasing in-store costs, particularly in the Norway market where it has 34 own-brand stores and is in the process of conversion of the stores of Dolly Dimple which was acquired by it in 2017.
“Whilst our international businesses continue to make good progress with customers and sales, it has taken us some time to refine the operating model and cost base at store level, particularly in Norway,” said Chief Executive Officer David Wild.
Despite the total revenues of the company increasing by more than 180 percent in Norway, it faced higher losses because of enhanced increased labor costs. However, Wild assured that the performance of the company would get better in the second half of the year.
Compared to a value of 46.2 million pounds a year ago. the first half statutory pretax profit dropped by 9.7 percent to 41.7 million pounds.
The net debt of the company also climbed to 182.1 million pounds from 61 million pounds last year because of the increased overseas costs. It was also compounded by dividend distributions and share repurchases.
Shares were down almost 10 per cent at 287 pence at 0955 GMT (5.55 a.m. ET).
The setbacks in the international market was partly offset by a good performance by the company in its home market of UK where the company dominates with a market share of about 46 percent in the pizza delivery segment.
During the FIFA World Cup, 8.2 million pizzas was sold by the UK’s biggest pizza delivery company. In the six months ended July 1, there was a 8.3 per cent increase in sales in UK which was instrumental in the firm notching up an increase of 12.8 per cent in the overall sales of the company at 616.6 million pounds.
There was a 14 per cent increase in the online sales of the company in the UK, which accounted for about 79 percent of the total sales in the home market of the country.
One of the measures that Domino’s is betting its future on is the technology of allowing customers to track their orders for pizza and the company expects a complete implementation of the technology within the third quarter of the current year.
Domino’s said that the process of selection of an interim chief financial officer is in the advanced stages. The former CFO Rachel Osborne had resigned in June in a shock departure.

Christopher J. Mitchell

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