Domino’s Pizza promises more local deals as food costs fall

Domino’s Pizza Group has become the latest fast-food company to promise cheaper prices through more promotions, saying it would pass on falling costs to customers in coming months via local deals.

The chain made the announcement as it downgraded its full-year profit outlook after lacklustre orders in the first half of the year, despite receiving a lift from the Euro 2024 football tournament.

With food costs falling, the company said it would share more of these lower costs in the second half of the year with franchise partners. A spokesperson said the company expected franchisees to pass on these savings to customers, as they set the menu price and could offer deals in their area.

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Domino’s also runs national promotions, such as a £4 lunch deal. Andrew Rennie, the chief executive, said sales made at lunchtime only made up 10-15% of Domino’s business but the company hoped to increase this.

There has been a sharp rise in promotions at fast-food groups in response to intense competition and the cost of living crisis, with McDonald’s and the bakery chain Greggs offering low-price breakfasts and KFC and Domino’s trying to lure customers with lunch deals.

Domino’s stores in the UK and Ireland are run by 65 franchisees, which vary in size; some operate hundreds of outlets while others have just one store.

The company said orders fell by 0.9% to £35.1m in the six months to 30 June, while revenues were down by 1.8% to £326.8m. Statutory profit before tax dropped by 35% to £59.4m. As a result, Domino’s expects underlying earnings before interest, which totalled £69m in the first half, to be towards the lower end of analysts’ forecasts of between £144m and £149m.

Domino’s said it received a boost from the men’s Euro 2024 tournament that ran between mid-June and mid-July. It sold 20 pizzas a second during England’s games, up to the final when the team lost to Spain. In July, orders rose by 5.8%.

Rennie said: “Following a slow start to the year, we now have good momentum in the business with our strategic initiatives gaining traction and our trading performance accelerating steadily against strong comparatives from last year.

“In the second quarter, we grew orders, with a notable improvement from the middle of May and importantly have halted the trend of declining delivery orders. These are now returning to growth and this momentum has continued through June and July.”

He told investors that when the company turns 40 years next year, it will have nearly 1,400 stores, and is aiming get increase that to 2,000 in the next three to five years. While its rivals Pizza Hut and Papa Johns have been closing stores, Domino’s plans to open 70 outlets this year. It opened 22 in the first half of the year.

Last week, McDonald’s said it was reconsidering its pricing strategy and would offer more discounts to tackle sliding sales. Sales fell by 1% at outlets open for at least a year between April and June compared with a year earlier, the first drop since the Covid pandemic.