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Domino's Pizza Enjoys Online Sales Boost But Sales Slow In Q3

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Online sales now account for more than half of pizza purchases | Alamy

Shares in Domino's Pizza dropped 5% on Wednesday in spite of the company reporting positive growth in a tough market.

UK sales were up 3.7% in the three months to 23 September with total sales for the group up 7.9% to £136.4m, with people buying pizzas online now accounting for more than half of all sales.

However, the like for like UK sales showed there had actually been a slowdown for the third quarter; Last year the sales increase was at 4.1% for the same period.

Some of the slowdown has been explained by the lack of advertising spend in this quarter, but analysts predict this will change in Q4 as advertising is set to increase, and historically the last three months of the year are often the strongest for Domino's.

Lance Batchelor, Domino's chief executive, commented: "Our franchisees continue to show demonstrable enthusiasm and commitment to drive the business forward, even in a challenging economic climate. We continue to set ourselves ambitious targets but believe that a great product, supported by exemplary customer service and innovative marketing will deliver strong growth in the years to come."

Mintel's senior food analyst Alex Beckett told the Huffington Post UK that despite the recession, just 14% of adult pizza eaters were saving the pennies by switching from delivery to shop-bought pizza.

"Domino's gung-ho attititude to new toppings and crusts makes the own-label dominated take-home sector look sluggish and its bold approach to marketing oozes self-confidence - all of which core, young pizza consumers lap up," he added.

However, Lauren Charnley, stockbroker for Redmayne Bentley, told Huff Post UK the UK markets had found that gung-ho enthusiasm "hard to swallow", citing disappointment after achieving an impressive 11% sales growth in the first half of 2012.

“The move to introduce an online offering has most certainly been instrumental to the group’s success," she continued.

"It’s clear that as the likes of justeat.com flourish, the old adage, ‘if you can’t beat them, join them’ has paid off for Domino’s.

The international arm of the business has also performed well; the interim results stated that on 24 September 2012, Domino's completed the acquisition of the business and assets of Domino's Switzerland, adding 12 stores to the group's portfolio and the exclusive rights to develop the market in Switzerland, Liechtenstein and Luxembourg.

The chain also gained the option to acquire Austria as a franchise territory, which will be available until the end of 2014.

And Domino's remains confident about the future growth of its German business, saying: "We will be moving our German head office operation from Berlin to Dusseldorf before the year end, as well as opening a new commissary to service this expanding market - the fourth commissary for the Domino's Pizza Group."

Redmayne Bentley's Charnley said the international arm would certainly aid profits during the current recession in the UK, "although the group is somewhat limited with operations solely in Europe".

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