Slice of VAT: Domino’s Pizza’s UK sales drop as budgets tighten
Domino’s reported VAT hikes taking a slice of the pizza this morning, with UK & Ireland system sales down 1.5 per cent in the first quarter to £365.9m.
The main driver for this was the fact that the VAT rate on hot takeaway food was 12.5 per cent compared to the five per cent in 2021, meaning that if the sales price to the consumer were to have been unchanged then the rate increase would have effectively delivered a reduced system sales value compared to the same quarter last year.
Excluding the impact of the increase in the VAT rate, Domino’s Pizza said system sales increased 4.9% in the quarter for the UK, whilst orders grew a humble 5.5 per cent.
Order count growth this quarter was driven by the recovery of collections which grew 45.4 per cent, which is not only the most efficient from a labour perspective for the firm, but the quarter also hits 95 per cent of pre-pandemic levels.
Active customer growth grew a humble five per cent compared to the same period last year, when the UK was largely in lockdown.
Having said this, the takeaway giant is still growing. The company has opened nine new stores this year, by seven different franchisees, and remains on track to open at least 45 new stores this year.
Commenting on trading, Dominic Paul, Chief Executive Officer said:“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.
“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.
What’s more, at a time when family budgets are under pressure, Domino’s remains an affordable treat everyone can enjoy, and we’re redoubling our focus on offering our customers the best possible value this year.”
Looking forward, the pizza giant expects underlying EBITDA and EPS in the full year be in line with current market expectations.