Domino’s spends £7million stockpiling pizza toppings in case No Deal Brexit disrupts supplies

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Domino’s has spent £7million stockpiling pizza toppings including tomato sauce and frozen chicken in case a No Deal Brexit disrupts supplies. 

The pizza company made the announcement today in its interim results for the 26 weeks ending June 30, 2019. 

It revealed it had conducted a ‘£7million increase in inventory levels for Brexit planning’ on imported ingredients including tuna and pineapple.

And has had to buy up extra tomato sauce, as this is imported from Portugal – unlike the flour and cheese used in its pizza bases. 

The company revealed its net debt, which rose to £238.8million from £182.1million compared to its previous results ending July 1, 2018, had been impacted due to ‘Brexit-related stock building’.

It added: ‘A potential no-deal Brexit carries the increased risk of disruption to raw material supplies into the UK and foreign exchange volatility which could increase food costs.’ 

Boris Johnson has promised to take Britain out of the European Union by October 31 with or without a deal. But a no deal Brexit could have a severe impact on importers of perishable foods in Britain.

About 28 per cent of Britain’s food comes from the EU and some fresh vegetables and fruit could become more expensive. 

The announcement came as it was revealed Domino’s chief executive David Wild is to step down from the business after five years at the top. 

Any Brexit disruption could add to the company’s ongoing disputes with franchisees and difficulties expanding beyond the UK.   

Wild’s tenure has seen him get through four different finance directors, while the past year has been defined by a row with franchisees.

Store owners have been demanding a bigger slice of the company’s profits in response to the pressure to open more stores.

The entrepreneurs, many of whom have mini-empires of multiple sites, say profitability has declined as they stomach rising costs.

As franchisees drag their feet on new openings, competition from the likes of Deliveroo and Just Eat has been growing, leading investors to be concerned for the group’s future.

Shares have declined by more than 25 per cent since this time last year.

In an announcement this week, the group said it expects the dispute to last into 2020 as it tries to find a solution.

Meanwhile plans to conquer markets outside of the UK have produced mixed results.

Sales in the international division are up but earnings in the first half were down in Norway, Switzerland and Sweden.

Mr Wild will remain on the board until a new chief executive is in place, after which he plans to retire.

A veteran of Tesco, Mr Wild is said to have taken a tough line in his dealings with suppliers by making them wait 45 minutes for meetings.

He also worked for Walmart before becoming chief executive of Halfords in 2008.

He led the motor and cycling retailer for four years but was shown the door in 2012 after a decline in the group’s performance.

Neil Wilson of Markets.com said the 5 per cent rise in the Domino’s share price following the announcement of Mr Wild’s departure was ‘a bit harsh’, but noted that investors were pleased by the news.

‘He’s faced a tough battle with franchisees that is still ongoing, and it’s been a struggle to break into the European market as easily as in the UK,’ he said.

Meanwhile analysts at Numis said: ‘We believe a management transition may allow new perspectives on franchisee negotiations and might lead to a change of approach internationally.’

Domino’s, originally a US brand, opened its first UK outlet in Luton in 1985. It now has more than 1,000. 

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