Domino’s Polish business has already secured two new sites for opening in 2012 and remains on-track to open 12 this year, despite reporting steep losses in H1.
DP Poland has reported a pre-tax loss of £676,399 for the six months to 30 June 2011, with chief executive Peter Shaw highlighting “significant investment in infrastructure [and] rapid development of our operational capabilities”.
Revenue in the period was £69,676, based on 16 weeks trading at its first outlet, which opened in February, and two weeks at its second.
Pre-tax loss for the remainder of 2010, since it was established last summer, was £411,267.
DP Poland, which raised £6.5m following its listing on AIM in July 2010, currently operates six outlets in the country - it opened two last week.
Shaw said the next six are under construction. Two leases are already signed for opening in 2012, “with many other potential sites under negotiation”.
He said: “Our initial store build costs and central costs have been higher than originally anticipated as we put the infrastructure in place for the store roll out, but we are already improving on the average fit-out cost.
“We have also reduced the time it takes to open a store to six weeks, from lease signing to store opening. Unexpected management changes last year resulted in a slower roll out than planned for the first half, but I am pleased to reiterate that our store openings are back on track to achieve the target of 12 store openings in 2011.”
Shaw flagged up the “significant rent deposits” being demanded by landlords in Poland’s “competitive real estate market”. There were also unanticipated marketing costs and greater than expected initial IT investment.
“However, as a result of this greater investment the quality of our stores and their locations is high and our online capability is already attracting an average 10-15% of sales, without promotion of this channel.”
He reported “encouraging” growth in transactions and expected to the first 12 sites to “hit initial sales maturity after 12 months”.
“As our brand reputation becomes established we believe that stores will hit initial sales maturity earlier. In support of this we are actively developing our menu with more targeted pricing and new product introductions.
“We also believe that our various marketing initiatives, such as 25 scooter and 4 Smart car Domino’s Pizza convoys, are impacting our presence in our store neighbourhoods and the city of Warsaw overall.”
He labelled September’s sales figures “encouraging”, adding: “As we move into autumn we expect to see a further increase in sales as cooler, wetter weather encourages people to order food in.
“We believe that the rapid roll-out of our stores in Warsaw this year and next is key to driving sales growth. Once we have a significant store presence we will have the critical mass to justify cross-city marketing, in support of our local store marketing. With greater store presence we believe that the Domino’s Pizza brand will have a significant and growing impact on customer perceptions and buying behaviour.”
Shaw highlighted Euromonitor figures predicting that the Polish pizza food service market is to grow by 7% in 2011.
The company hired Agnieszka Kaczmarek as its new head of site development in June to aide its expansion. Kaczmarek has responsibility for site identification, lease negotiation and store construction and fit-out.
