Domino’s Pizza to lift pizza prices again amid inflationary pressures as profit drops

The national’s biggest pizza chain slashes its final dividend as its profits slide, and warns that it will need to lift pizza prices again as inflation bites.

Domino’s Pizza CEO Don Meij at the company headquarters in Brisbane. Picture: Tertius Pickard/NCA NewsWire

Domino’s Pizza has slashed its final dividend, raised pizza prices and introduced a delivery fee for the first time to cope with inflationary pressures – but says it is witnessing a moderation in wheat and cheese prices that could provide pricing relief.

The pizza chain has also broadened its base in the Asia Pacific, buying the Domino’s brand in Malaysia, Singapore and Cambodia to add to its stronghold in Australia and New Zealand as well as stores in Japan and Taiwan.

In Europe, the outbreak of hostilities in Ukraine and soaring inflation derailed the profitability of its Domino’s stores through the second half and together with a $12m loss for its Denmark pizza business, sent group profit plunging to miss analyst expectations.

On Wednesday Domino’s posted a 4.1 per cent lift in full-year revenue to $2.289bn as net profit fell 14 per cent to $158.7m, which missed consensus profit forecasts by around 4 per cent although the performance in its flagship Australia and New Zealand stores came in stronger than expected.

Domino’s declared a final dividend of 68.1c per share, down from the 85.1c final payment last year, payable on September 15.

Shares in the pizza chain – which operates the Domino’s brand across Australia, New Zealand, Japan, Taiwan Germany and France – rose $5.08, or 7.6 per cent – to close at $72.15.

Domino’s chief executive Don Meij said inflation in Europe had yet to be fully offset by the business with inflation in that region “higher and difficult to mitigate”.

In Australia, higher prices for pizza had mostly offset inflation, with the company introducing a 6 per cent delivery fee (capped at $4), but the price hike hadn’t impacted sales growth as yet.

“Customer pricing is complex and there is not a ‘one size fits all’ approach. We have had to slightly increase some of our prices and are likely to have to increase some more – just like all businesses right now,” said Mr Meij.

Mr Meij said Domino’s was adopting a “barbell” strategy to pricing and meal offers, launching premium products like its Burger Joint Cheeseburger pizza that carry higher margins and at the other end of the scale a range of value pizzas.

“The cheeseburger pizzas, by the way, they’ve done so well that we ran out of toppings last weekend and we rallied to fill our supply sources, and sales in Australia have been very strong which is helping inflation because those are premium products that holds really good margin.”

He said pizza pricing remained a delicate balance as Domino’s competed for customers when they considered their meal choices and compared to other fast foods or a home-cooked meal.

Mr Meij said early signs were that his key commodities, cheese and wheat, were starting to come down in price, which would help defer any further price hikes for Domino’s customers.

Domino’s achieved the largest full-year new store expansion in the company’s history in 2022, opening 294 new stores, an average of more than five stores a week. With the addition of 156 stores in the company’s tenth acquired market, Taiwan, Domino’s grew its multinational store footprint by 450 new stores in 2022.

In a trading update, the company said sales for the start of the financial year were down on the same period last year. Same store sales growth weaker by 1.1 per cent, the company said.