Domino’s boss tips return to growth despite profit slump and slashed dividend

Domino’s Pizza chief executive Don Meij believes his pizza chain is already back on the path to the type of premium growth the former market darling was famous for.

Domino’s Pizza chief executive Don Meij believes his pizza chain is already back on the path to the type of premium growth the former market darling was famous for, after a horror year in which customers revolted over a delivery fee, double-digit cost inflation and it losing market share to hamburgers.

An ever-optimistic Mr Meij, despite having just handed down a 74.4 per cent dive in full-year net profit that missed analysts forecasts, a slashed dividend and flat sales, said the pizza maker was “already rebounding” from a tough 2023 and pointed to strong sales growth across its stores in Australia, New Zealand and ­Europe for the start of the 2024 fiscal year.

Mr Meij said the company would have the tailwinds this year from reduced food, energy and transport inflation, which would help mitigate the cost of a 5.75 per cent lift in wages via the Fair Work Commission.

Domino’s also would not have to lift its pizza prices in 2024, as it did last year to counter double-digit inflation in core food ingredients such as cheese, meat and wheat, while fast food chains offering burgers would probably have to – making his pizzas more price competitive.

“We won’t have to increase prices this year as they are now because of the fact we have tailwinds behind us … and we are talking about a menu that is pretty much set,” Mr Meij said.

With the shift back to in-home dining as consumers retreat from restaurants and cafes to save money, he said Domino’s was in the perfect position to capture this growth.

“Our mission is to be the dominant, sustainable, delivery quick service restaurant,” he said.

“All of our meals are consumed off premises so all of our meals are consumed in home, or an office or in a park, and so we’re benefiting from the in-home consumption.

“Now, we lost some share to other categories last year, like burgers, when we weren’t as competitive. Last year they didn’t take price increases as fast as we did. Now they (burgers) are pushing up their prices and we are not.

“And now we are seeing volumes up in our numbers.”

Domino’s, which has 3736 stores across Australia, New Zealand, Asia and Europe, on Wednesday said net profit fell 74.4 per cent to $40.6m, with earnings as much as 5 per cent below analyst expectations, as a year of inflationary pressures and customers revolting against price rises and delivery charges smashed earnings growth.

Underlying earnings fell 23 per cent to $201.7m.

The company said revenue for the 2023 fiscal year rose 3.5 per cent to $2.351bn. The company declared an unfranked final dividend of 42.6c a share, down from 68.1c last year, and payable on September 28.

At its peak in 2021, Domino’s shares were trading around $160, but a series of missteps, profit warnings and operational issues in some regions saw a fall of as much as 75 per cent and the loss of its reputation for being one of the market’s supercharged growth stocks.

Despite sales growth in Asia (Japan and Taiwan) falling 7.8 per cent since July, there was 6.6 same-store sales growth across Australia, New Zealand and Europe for the start of the 2024 fiscal year. Analysts also pointed to guidance of $33m-$40m in 2024 earnings improvement from cost savings initiatives, up from previous guidance of $25m-$30m.

Domino’s is also targeting as much as $63m in 2025 earnings improvement, also up on previous guidance.

Shares in Domino’s bounced on the result and promises of further cost savings – which will include as many as 200 job losses at its support centres around the world – to gain 10 per cent.

The shares later closed up 11.8 per cent at $53.70.

Mr Meij admitted he didn’t get the “value equation” right when the pizza giant decided to raise delivery fees to counter the massive inflation in the business, leading to a downturn in pizza orders.

He said earnings improvement in the 2024 fiscal year relied on rebuilding customer frequency and order volumes, with new products a proven path to increasing orders.