Domino’s Pizza says pandemic is changing the pizza business

Coronavirus shutdowns and home isolation are changing the way Australians order their pizzas, according to Domino’s.

Domino's Pizza South Mackay manager Justin Clarke. Picture: Tony Martin

The shutdowns and home isolation triggered by the coronavirus pandemic are changing the way Australians order and pay for their pizzas, according to Domino’s in Australia.

The nation’s biggest pizza maker is reporting less use of cash for deliveries and customers ordering on different days and at different times of the day than had become usual.

Domino’s Pizza Enterprises released a trading update to the market on Friday which also reported that its store network in France was slowly reopening after government closures, with about 70 per cent of its outlets now trading. Domino’s New Zealand stores were slated to reopen on April 28 and the company’s store networks in Japan and Germany were continuing to show strong sales performances.

In Australia and Europe, same store sales performance had been positive but new consumer behaviour shaped by the coronavirus pandemic, and people staying at home, is affecting individual stores in each market unevenly, it said.

“Domino’s reiterates its policy is not to provide short-term guidance and any previous statement which might be construed as earnings guidance for the current financial year is withdrawn.”

Over the medium-term, Domino’s said its outlook was unchanged for new store openings (7 to 9 per cent per year), although there would be some delays in new stores slated to open. It expected same store sales of between 3 to 6 per cent a year and net capital expenditure of $60 - $100 million per year.

“COVID-19 has introduced short-term uncertainty for some franchisees that will delay the opening of stores that were planned for FY20,” Domino’s said.

“Store openings in fiscal 2021 will be dependent on local market conditions relating to COVID-19.”

Meanwhile, the way Australians order and pay for their pizzas was changing in the new world of home isolation and social distancing.

The pizza maker said underlying consumer demand for Domino's pizza remained consistent, with the principal challenge being how to supply that demand in the current environment.

Domino's is observing a material shift to food delivery in all markets, as customers follow recommendations to stay home where possible.

“Many have told us they are doing the right thing by staying home, reducing the pressure on supermarkets and other services,’’ Domino’s chief executive Don Meij said.

“Their Domino’s delivery is helping them to stay home, as well as providing a welcome moment of normalcy in these challenging times,” Mr Meij said.

Don Meij, CEO of Domino's. Picture: Steve Pohlner

Domino’s is observing other changes in customer behaviour related to COVID-19 and is adjusting its marketing and operations to adapt. Fewer customers are using cash, and many are ordering at different times, on different days, or from different stores than their usual order.

As customers are not following their normal work and holiday patterns, stores closer to universities, central CBD locations, and holiday regions have seen sales impacts. However, Domino’s has also observed stronger sales in stores servicing those same customers who are staying at home.

The company said it also recognises that support is needed in the communities in which Domino's operates, with its charitable work already providing more than 100,000 pizzas across all its territories.

At its international operations, France stores were reopening, while sales performance in Germany was continuing to lead the region. In the Benelux sales performance had been affected by a move away from carry-out sales. An increase in delivery orders had not yet overcome this change in customer behaviour.

Sales performance in Japan had significantly increased, with management focused on ensuring store operations can meet increased demand from both delivery and takeaway customers, Domino’s said.

Domino’s added that its balance sheet “remained strong”, with “significant headroom on its committed debt facilities and covenants”.

“The company has no committed short-term debt, with committed debt facilities due for renewal in the first half of 2023. As at 27 March 2020, the company has undrawn committed debt facilities and cash in excess of $260 million.”