BRITAIN – Britain’s biggest pizza delivery company, Domino’s Pizza Group Plc has said that it would pull out from its loss-making international operations, sending shares higher in early trade.
The move to exit four European markets comes a few months after the company announced that its CEO David Wild would retire, amidst a row with disgruntled franchisees in the UK and Ireland over commercial terms.
“We have concluded that, whilst they represent attractive markets, we are not the best owners of these businesses,” outgoing CEO Wild said.
The company however revealed that its businesses in the four countries will continue as normal during the exit process.
“We have begun a process to identify new owners for each of the businesses, with the intention of the Domino’s brand continuing in all four,” the company said.
Analysts said the move would allow Domino’s to focus on its core British and Irish businesses and prepare the ground for a new CEO to boost growth in those markets.
“Domino’s is now pulling the plug on its international operations after admitting defeat,” said Russ Mould, investment director at AJ Bell.
“This is the sensible thing to do. Management should be applauded for making the decision to pull out rather than digging themselves a bigger hole,” added the investment director.
Domino’s has struggled to control costs in its overseas business, especially in Norway, where it was converting the local pizza operator Dolly Dimple’s stores it bought in 2017.
Europe’s economy has also been slowing down owing to uncertainties around Brexit and the the prolonged U.S. – China trade war and this has had a significant on Domino’s bottomline.
“Although the impasse with the UK franchisees is ongoing, the decision to exit the loss-making international markets in an orderly manner releases one of the constraints on the share price,” Peel Hunt analysts said.
The company said third-quarter group system sales rose 3.4% to 313.5 million pounds (US$400.15 million) on strong demand in the UK and Ireland. However, international system sales fell 2.7%.
The British company – which is itself a franchise of U.S.-based Domino’s Pizza Inc – owns Domino’s operations in Switzerland, Iceland, Norway and Sweden, and owns a minority stake in its German operations.
The company has 63 franchisees in Britain and seven in Ireland, with two of the largest franchisees accounting for 39% of stores.
The company said the search for a new chief executive continues while it also looks for a new chairman