UK's Domino's Pizza sees slower first quarter growth

Britain's Domino's Pizza Group DOM warned on Tuesday first quarter orders and sales growth would be lower than a year earlier as it curbs marketing spending to support the launch of a loyalty programme and other initiatives, hitting its shares.

The stock dropped as much as 12%, before trimming losses to trade down 6.4% at 344.4 pence by 1140 GMT.

January is one of the quieter months for the local franchisee of U.S.-based Domino's Pizza DPZ as Britons cut back on spending after year-end holidays, allowing the company to rein in marketing, CEO Andrew Rennie told Reuters.

Domino's said it still expected full-year underlying core earnings in line with analyst expectations, which it said ranged from 139.6 million to 153.2 million pounds ($179 million-$196 million).

For 2023, the company posted a 3.6% rise in underlying core profit to 138.1 million pounds on sales up 5.8% at 1.57 billion pounds.

Total orders rose just 1%, with a 13.3% increase in its collections business offset by a drop in deliveries as customers looked to save on delivery charges.

Domino's is targeting 2 billion pounds of sales by 2028 as it increases the number of stores to 1,600. It currently has 1,319 outlets in the UK and Ireland.

The company said 73.8% of total orders were placed on its app last year, up 21.6 percentage points from 2022.

Data from Apptopia, a data analytics firm, showed that app downloads were down in recent months, which analysts have said could slow sales growth.

"We've got not only app downloads, we have online ordering, we have open front counter, which a lot of collection customers do," Rennie said, adding customers also came through other channels such as Just Eat and Uber Eats.

The company is rolling out a loyalty programme, which it says has worked well in the United States, across Britain this year.

It also said it had bought the remaining 85% stake in Shorecal Limited, its partner in Ireland, for 72 million euros ($78.7 million), which it expects to boost earnings in the first full year of ownership.

($1 = 0.7816 pounds)

($1 = 0.9147 euros)