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Domino's Pizza Group Up 6.5% After Delivering Strong Sales Growth

By Sam Robson - Apr 4, 2013 at 9:46PM

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Domino's Pizza Group beats the snow to build on last year's performance.

LONDON -- Shares in Domino's Pizza (DOM 0.43%) rose 6.4% in early trade this morning, to reach 607.50 pence, following the release of its Q1 interim management statement.

The leading pizza delivery company reported a 12.3% increase in system sales, coming in at 164.1 million pounds against 2012's 146.2 million pounds, which was driven by strong like-for-like (LFL) sales growth in the latter part of the quarter. LFL sales in 670 mature U.K. stores rose 6.6%, in comparison to the previous year's 4.1% increase in 615 mature stores, while the Republic of Ireland's LFL sales (reported in euros) have been resilient throughout the period, and rose by 8.1%, in contrast to 1.5% in 2012.

Along with sales of new products, including the Hot Dog Stuffed Crust, and a successful short-term price-led promotion, the colder weather has actually benefited the company, as it's seen consumers order more takeaways in comparison to a warmer period last year.

A lot of Domino's growth in recent years has come from the Internet and orders from mobile devices, and that shows no signs of abating, just yet: 61.9% of all U.K. delivered sales came via the Internet (2012: 49.8%), while sales taken through all online platforms were up 38.4%, to 82.4 million pounds (2012: 59.5 million pounds) -- of this, 25.2% was taken through a mobile device (2012: 16.4%).

The pizza company is also expanding its presence in Germany, the country has seen two of the seven new stores launched this year -- the remaining five opened in the U.K. -- while 18 new stores are planned for Germany this year, and 60 in the U.K. In the six mature German stores, LFL sales in euros are up 40.3% in the period (2012: 3.7%).

Chief executive officer Lance Batchelor commented: 

Domino's continues to show that there are still significant opportunities in our core U.K. and Republic of Ireland markets as well as the new territories of Germany and Switzerland, and we are in a great position to seize those opportunities.

We know that the ongoing economic pressures are leading to a tough trading environment and we have extremely tough comps in the second quarter to overcome as well as food cost increases coming through during the year, but, with first class franchisees and a strong head office team, I expect, at this early stage in the year, that trading will be in line with market expectations for 2013.

Domino's share price recently fell back after a bit of profit-taking following strong results; however, today's news sees investors piling back into the stock as it continues to perform despite tough trading conditions.

This morning's update from the company should remind you how dynamic growth companies can become wonderful investments for ordinary investors. Indeed, Domino's shares have jumped more than 25-fold since their 2002 low.

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