LONDON -- U.K.-based PizzaExpress (U.SCG) announced Sept. 10 that its profits for fiscal year 2002, ended Aug. 31, dropped 5 percent.
According to Dow Jones Newswires, the company's pretax profit was £38 million (U.S. $59.2 million), compared to last year's £40 million (U.S. $62.3 million) profit.
According to BBC News, HSBC Securities downgraded its rating of Pizza Express shares to "reduce" from "add," advising investors to consider switching to Ask Central, a competing pizza chain whose profits rose 23 percent for the year.
For the year, PizzaExpress' sales grew by 15 percent to £213.7 million (U.S. $333 million). While it had anticipated pretax profits of £40.7 million (U.S. $63.4 million) this year, the company blamed a combination of London tourism declines, rising rents and wage increases for causing it to miss its goal. Nearly one-third of PizzaExpress' stores are located in London.
Comparable sales for stores in London fell 3 percent for the year, while stores outside of London saw comparable sales grow 5 percent.
Stores open more than 10 years posted sales declines, while newer restaurants open less than one year saw sales in line with expectations, the company said.
Admitting its older stores need makeovers, PizzaExpress is considering upgrading 60 to 80 sites over the next fiscal year.
PizzaExpress reported that supermarket sales of its frozen pizzas jumped nearly threefold, albeit from a low base. It distributes its products in Sainsburys and began selling in Waitrose stores in August. The company also plans to expand its takeaway PizzaExpress To Go chain, which includes three outlets at present.
The Dow Jones report said Old Mutual Securities analyst Greg Feehely questioned the wisdom of expanding into supermarkets, however, saying the move could pull sales from PizzaExpress stores. Still, he said PizzaExpress remains inherently strong and continues to generate strong cash flow.
In his Dow Jones Newswire column, "The Skeptic," Brian Truscott wrote that PizzaExpress may work to diversify further by following the lead of pub/bar developer Asda. Seeking real estate bargains, he said PizzaExpress may begin buying up vacant Woolworth's stores and changing them into pubs or restaurants.