Domino’s Pizza Group said the change in VAT rate was the only reason it failed to show an improvement in its latest quarterly results, but insisted there is “momentum in the business”.
The VAT rate on hot takeaway food was 12.5% during Q1 compared to 5% in the same period the year before.
As a result, sales for the three months to the end of March fell 1.5% to £365.9m but without the impact the increase would have been 5%.
Sales decreased 2.4% on a like-for-like basis, again reflecting the higher rate of VAT in the quarter. Excluding the impact of the rise, like-for-like sales were up 3.9%
Domino’s said that orders grew 5.5% in the quarter despite a strong comparative reflecting the stimulus to its delivery business last year from lockdown restrictions. Order count growth this quarter was driven by the recovery of collections, which grew 45%.
Trading in the first quarter was strong, aided by its first national price campaign for several years, made possible because of the resolution of a marketing dispute with its franchisees.
Domino’s has opened 9 new stores this year, by seven different franchisees, and remains on track to open at least 45 new stores this year.
By the end of this year it plans to have 1,277 stores in operation, an increase of 4% on last year.
CEO Dominic Paul said: “We have momentum in the business with growth in order count and customer numbers, and are continuing to work closely with our franchisees following our resolution late last year. Our first national price campaign in a number of years has been a great example of what we can achieve when we work together.
“Our ambition is to consolidate our position as the nation’s favourite pizza brand and believe the time is now right to see whether we can reach an even broader customer base.
“On this basis, we have also commenced a trial which will enable customers in a small number of locations across the UK and Ireland to order Domino’s via the Just Eat platform but delivered by Domino’s drivers, making the most of our unrivalled network of best-in-class delivery drivers.”
He added: “It’s no secret that inflation is a key challenge for everyone at the moment and the current consumer environment is challenging, but our scale and integrated supply chain, as demonstrated in the Covid downturn, mean Domino’s is well-placed to navigate the current conditions.”