Domino’s Pizza reports 15% drop in half-year profits

Domino’s Pizza faces challenges with weaker consumer confidence and rising costs.

Domino’s Pizza reports sharp drop in profits amid changing market

Domino's Pizza announced a nearly 15% drop in half-year profits as it cited a challenging takeaway market in the UK. The company expects full-year underlying profits to range between £130 million and £140 million, falling short of analysts' projections by about £6 million. Increased wage costs, due to higher national insurance payments and a rise in the legal minimum wage, have made franchise partners hesitant to open new locations. While Domino’s gained some market share, the company opened only 11 stores in six months, significantly fewer than earlier predictions of over 50 openings for the year. The stock market reacted negatively, reflecting concerns about flat order numbers and overall sales performance. Analysts warned of broader implications for the fast-food sector as companies like Greggs and Papa John's also face declining profits and store closures.

Domino’s struggles reflect a wider trend in the fast-food sector, where rising costs and declining consumer confidence are forcing companies to rethink their growth strategies. The shift in eating habits towards healthier options, influenced partly by weight-loss treatments, complicates matters further. As consumers tighten their budgets, fast-food chains that traditionally thrive on low-cost offerings may need to adapt quickly to survive. Increased automation might help reduce costs, yet it also raises questions about the future role of human workers in these franchises. The unfolding situation offers a cautionary tale about the vulnerabilities that can affect even the strongest brands during economic downturns.

Highlights

As the food industry adapts, reliance on traditional models may need re-evaluation.