Advertisement

Domino’s Pizza goes cold as first-half profit sliced

Domino's Pizza chief Don Meij says the Australian market has been a shining light with revenue up.

Domino's Pizza chief Don Meij says the Australian market has been a shining light with revenue up. Photo: AAP

Domino’s Pizza Enterprises has admitted it was too quick to pass on inflation to customers, leading to fewer orders and plunge in profit.

The 3736-store global franchisee on Wednesday said its net profit after tax had dropped 21.5 per cent to $71.7 million for the 26 weeks to January 1, compared to the same period a year ago.

Sales were down 4 per cent to $1.966 billion and earnings before interest, taxes, depreciation and amortisation (EBITDA) were down 14.3 per cent to $212.8m.

The company slashed its dividend by 23.8 per cent to 67.4 cents per share, 60 per cent franked.

At 10.57am AEDT, Dominos shares had fallen 19.3 per cent to a three-month low of $57.58.

“We’re in the value industry and it’s the heart of everything we do, (and) during this half, we haven’t always balanced the equation right, particularly in delivery pricing, delivering the right product, the right service at an affordable price,” said CEO and managing director Don Meij.

The company acted “quite rapidly on inflation” by passing on increased costs for labour, food inputs and energy to customers through higher delivery pricing, Mr Meij said.

That was to Domino’s benefit in October and November, but by December and January customers had responded by ordering less frequently, particularly in Europe and Asia.

“The decreased volume obviously has a big impact on our earnings,” Mr Meij said during a Zoom presentation on Wednesday.

“We are a volume business and less volume isn’t helping.

“I’m a little embarrassed to say that probably for the first time in a very long time we didn’t get it right in a buoyant market. So we haven’t gotten the share that we deserve.

“I would say that burgers overall is winning that, around the world, burgers are probably getting more right in most markets.”

Australia was a “shining light” for DMP, Mr Meij said, with earnings before interest and taxes (EBIT) rising 5.2 per cent to $63.4 million, although revenue was down 0.1 per cent to $402.7 million.

But in Europe, EBIT was down 48.4 per cent to $25.6 million and in Asia it fell 20.3 per cent to $36.4 million.

In Australia and New Zealand, the business has protected and rebuildt franchisee profitability as food and labour costs rose significantly.

Executives said they were excited about the potential of new flexible digital vouchers that use low “headline prices” try to lure customers onto the Domino’s platform.

For example, two pizzas and two sides were being advertised for $17, whereas three months ago the same deal would have cost $27.99, Asia Pacific CEO Josh Kilimnik said.

“The headline price of $17 attracts the customer into the platform, and then it’s up to them if they’d like to upgrade or change out sides or pizzas – it’s up to them and it’s their choice,” he said.

“What’s interesting is we’re actually seeing a higher ticket even with presenting a lower headline price, by offering more choice in the platform.”

Domino’s was rolling the vouchers out in other markets after testing them in Australia and New Zealand since December, he said.

Still, Domino’s said it expected same-store sales growth for 2022/23 below the medium-term outlook of 3-6 per cent growth “as a result of most-recent tumultous trading conditions”.

-AAP

Advertisement
Advertisement
Stay informed, daily
A FREE subscription to The New Daily arrives every morning and evening.
The New Daily is a trusted source of national news and information and is provided free for all Australians. Read our editorial charter.
Copyright © 2024 The New Daily.
All rights reserved.