Domino’s eyes hundreds of new stores as global sales soar

Domino’s boss Don Meij has said his pizza business could potentially open hundreds of stores across the second half of the financial year as the $9 billion business continues to benefit from a boom in food delivery brought on by COVID-19.

Mr Meij told The Age and The Sydney Morning Herald Domino’s was aiming to open “notably more” stores than the 131 stores it already opened in the first half, though warned the business could start to see earnings slow partly due to the company resuming paying executive bonuses.

Domino’s chief executive Don Meij has said the resumption of paying executive bonuses could be a ‘speed bump’ for Domino’s earnings.Credit: Attila Csaszar

“We do expect to continue to have strong sales [for the second half]. We’re going to do a much bigger number,” he said. “However, in our earnings, we do expect to have some speed bumps.”

These include a weaker Australian dollar against the Japanese yen along with Domino’s having to match extremely high growth rates at its Japanese division. Mr Meij also said the payment of executive bonuses would likely weigh on earnings.

“Most of the executives didn’t get paid bonuses last year because we took government support at that time, though we have handed that back,” he said. “So management in our team will likely get incentives this year so that’ll be a cost back into the [business].”

Mr Meij’s comments come as Domino’s unveiled its half-yearly earnings for the first six months of the financial year, which smashed analyst expectations.

Sales across the network grew 16.5 per cent to $1.84 billion and its net profit after tax rose 32.4 per cent to $96.2 million. Same-store sales growth jumped 8.5 per cent thanks to the heightened number of stores opened across the half.

Shares in the pizza group reached new heights of $106.26 on Wednesday, pushing the value of Mr Meij’s own Domino’s shares over $190 million.

Much of the business’ growth in recent years has been from the company’s international operations in Europe and Japan, and this half was no exception. Japanese sales soared 42.6 per cent and earnings more than doubled to ¥4.2 billion ($51 million). European sales were more subdued but still gained 13.8 per cent, with a near 20 per cent rise in earnings.

Mr Meij said the worsening COVID-19 situation outside of Australia had been “very challenging” but acknowledged the business was benefiting from locked-down customers opting for more takeaway food.

Sales across the company’s 833 Australian and New Zealand stores also rose despite slower growth in recent years as the company focused on its international operations. Total sales rose 5.7 per cent to $648 million, and better margins saw earnings rise 9.8 per cent to $63.7 million.

Sales for the first seven weeks of the new financial year were up 20.9 per cent for the period, or 10.1 per cent on a comparable store basis. Domino’s maintained its medium-term outlook of comparable growth of 3 to 6 per cent, but Mr Meij expects the company’s full-year result to be above that guidance.

Citi analysts said the result was strong but forecast a slowdown in earnings for the 2022 financial year.

“The fundamental debate will be what is transitory and what is more permanent in the level of growth the company has achieved in calendar 2020. We expect more limited upgrades to FY22 earnings,” they said.

Domino’s will pay shareholders an interim dividend of 88.4 cents per share on March 11.

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