Domino's Pizza plans to go head to head with upmarket rivals Strada and Pizza Express in the autumn with the launch of a thin-based "gourmet" range of pizzas.
The fast-growing pizza delivery chain wants to broaden its appeal as the slowdown in consumer spending bites into growth. Chris Moore, chief executive, said the company had tripled its marketing budget to £7m for the second half of its financial year to support the new products. Moore described the first six months of the year as a "very tough operating climate" but said the initiatives, which include sponsoring the new Simon Cowell-backed TV show Red or Black, which offers contestants the chance to win a £1m, were expected to boost growth in the second half.
Despite the grim economic backdrop, profits at Domino's, which runs the British and Irish franchise operation of the global delivery brand, increased by 15% to £20.1m, sending its shares up nearly 5%. They closed up 23p at 482p. The shares have surged 25% in the past six weeks boosted by speculation, which the company batted away, that private equity firms were circling. Sales rose 9% to £237.1m in the 26 weeks to 26 June.
Like-for-likes in its UK stores were up 3.4% but its outlets in the Republic of Ireland struggled with like-for-likes down 8.4% during the six month period. It said sales were buoyed by the launch of "stuffed crust" pizzas which are aimed squarely at Pizza Hut customers.
Domino's, which has nearly 700 franchises in Britain and Ireland, benefited in the downturn from customers staying in and ordering takeaways rather than going out to eat. UK like-for-like sales were up nearly 14% in the first six months of 2010 thanks to the World Cup, sponsorship of Britain's Got Talent as well as the higher VAT rate.
"While the first half of the year has been tough, we are delighted that we are still showing good growth in the UK and the latter half of the year comes with lower comparatives," said Moore.
Execution Noble analyst Alistair Macdonald said: "There have been concerns around the like-for-like slowdown and maturity in the business model. However, these results should go some way in alleviating these concerns as the group is demonstrating growth despite very tough comparatives." Domnino's has embraced the internet with more than 40% UK orders booked online and the expectation that figure will increase to two-thirds within four years. It has apps for iPhone and Android mobiles and uses Facebook to advertise new pizza toppings.