Pizza Hut UK tightens margins to offset £8m drop in sales
Pizza Hut UK has reported pre-tax losses of £7.5m despite efforts to tighten margins and limit discounting.
The figure, published in its strategic report for the 12 months to 3 December 2017, compares to pre-tax profits of £5.2m the previous year, and follows a drop in sales of 3%, from £233m to £225m.
Pizza Hut's overall operating loss was £390,000, down from a £7.36m profit the previous year, which the company claimed was caused by "the increase in royalty rate under the franchise agreement and the impact of the prior year having a 53rd trading week". It also cited drier spring conditions and a less family-friendly cinema offering than seen in previous years.
However despite this the company, which runs 262 restaurants across the UK, experienced a trading EBITDA of £30.4m, up from £28.3m the previous year.
Within the report the company defended its commitment to marginal discounting on a localised model, as opposed to competitors like Domino's who have increased sales with themed discounts and offerings including the World Cup inspired ‘meat fielder' pizza.
The report notes: "Following several years of strong growth the casual dining sector has seen a decline in like-for-like sales over the last 12 to 18 months and by the end of 2017 growth was running below the rate of inflation.
"During this period there has been a decline in consumer confidence, which coupled with nominal wage growth and rising inflation has squeezed disposable income and impacted the consumer's appetite for discretionary spend.
"Compounding this impact has been the effect of the crowded market place following significant rollout activity over the last few years, the increase in delivery options and the impact of grab & go concepts."
Pizza Hut UK's bosses completed a management buyout of the company, assisted by funding from Pricoa Capital Group, earlier this year.
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