Domino’s earnings boosted by online orders amid pandemic

The pizza maker’s profit has surged despite store closures around the world, as consumers stuck in lockdown hit their phones.

Domino’s Pizza supported its franchisees to the tune of $14.1m in fiscal 2020 as the coronavirus pandemic saw as many as 550 of its stores closed and city locations resemble ghost towns, but it won back many consumers online as its website posted boom time sales.

Don Meij, the chief executive of the nation’s biggest pizza chain, which has operations across Australia, New Zealand, Japan and Europe, said that support was now starting to be wound back, but he was proud that during the COVID-19 crisis none of his franchisees went broke which has proved the resilience of the franchise model.

“We were able to keep people calm and say we will stand with you, no one is going to go broke, and I am so proud to say no one has,’’ Mr Meij said after Domino’s posted a 19.4 per cent rise in full-year net profit to $138.4m.

Shares in Domino’s rallied 10 per cent on the results to hit a record high, with the stock almost doubling since March to confirm its return as a market darling. The stock closed up $6.83, or 8.88 per cent, at $83.70.

The popularity of its digital platforms, which now serve 72.1 per cent of total sales, helped the company posted a 32.7 per cent increase in full-year sales to $1.9bn. Domino’s said total network sales for all stores rose 12.8 per cent to $3.27bn for the year.

And its Japanese business, which it bought seven years ago, was thriving and creeping up to be its biggest earner.

Its financial support to stores, of which around half came from various government subsidies such as JobKeeper, did come at a cost of Domino’s full-year earnings. At its flagship Australian and New Zealand operations earnings fell 5.8 per cent to $129.4m as the costs of COVID-19 such as supplying masks and other protective equipment dented profitability.

Pre-tax earnings rose 3.6 per cent to $228.7m with free cash flow up 90.7 per cent to $161.9m. Its underlying EBITDA of $303m was up 7.3 per cent and a record result for the pizza chain.

Domino’s declared a final dividend of 52.6c per share, down slightly from 52.8c last year, and payable on September 10. Its total dividend for the year was up 3.3 per cent.

In Japan Domino’s achieved a record performance with sales up 25.9 per cent to 59.2bn yen ($770m) and earnings up 29.9 per cent to 7.5bn yen.

In Europe short term closure of stores in France required more support for franchisees which reduced earnings by 1.5 per cent to €50.6m ($83m).

For the start of fiscal 2021 the company said same store sales growth was up 11 per cent, with total sales up 18.5 per cent.

“In ordinary times I would be delighted with double digit same store sales and network sales approaching 20 per cent. But these are not ordinary times,’’ said Mr Meij.

Same store sales growth of 11 per cent compounded 4.7 per cent growth in the prior corresponding period, and from 24 new stores compared to 9 new stores opened during the same period last year.

“While I am very pleased with our performance so far, the nature of COVID-19 is we know governments could require a temporary restriction, or a market closure, at very short notice.

“We are going to do everything we can, with the experienced teams we have, to add new customers and increase frequency. But the effect of societal restrictions is not entirely within our control.”

Domino’s reaffirmed the company’s medium-term outlook for same store sales growth of 3 to 6 per cent and network growth of 7 to 9 per cent in new stores.