Domino’s Pizza swings to first half loss as Mark van Dyck vows to act

The pizza chain has slammed the brakes on its aggressive global expansion and shuttered stores and cut costs, causing heartburn for investors, with the company swinging to a loss.

Domino's Pizza CEO Mark van Dyck.

The Domino’s Pizza boss of three months, Mark van Dyck, has pledged decisive action to arrest declining profitability and rein in its costly global growth ambitions, with no “sacred cows” as he shuts down loss-making stores, freezes some IT projects and forces a painful restructure.

Mr van Dyck has moved at pace, already announcing the closure of 205 loss-making stores, of which 172 will be in Japan, and pausing 15 technology projects to refocus on more promising IT strategies to better harness online sales via its mobile app and digital platforms.

His long list of other strategies are conclusions from only a few months in his role and touring its global operations, such as improving the quality of its food and the pipeline of new menu ideas to offering more transparent pricing to diners, using fewer vouchers and better aligning with the tastes of consumers in individual markets.

“I’ve visited six countries, got around dozens of stores, talked to a lot more franchisees and consumers, and I remain enormously positive about the full potential for this business,” Mr van Dyck told The Australian after Domino’s on Tuesday posted an interim loss of $22.2m as the pizza chain’s accounts were crunched by $115.64m in writedowns and restructuring costs. It was the company’s first loss in 20 years, although it did post a statutory loss in the second half of 2023.

“We are in strong markets with strong positions, they’re big pizza markets with a lot of headroom.

“I am encouraged by the growing momentum in the business … and we remain very optimistic on the opportunity. I think it’s about making firm choices, it’s about thinking hard about where we double down, where we allocate capital to get maximum growth.

“That’s what we’re calling it, ‘a value creation plan’. But we’re not waiting for that, and there’s a lot that can be done in the meantime … and we have taken some key action, store closures I have talked about and what you will also have seen hopefully is what I initiated when I joined is a cost efficiency program and I am viewing that as venture capital for growth.”

Domino’s Pizza has reported an interim loss of $22.2m. Picture: Sarah Marshall/NewsWire

However, many analysts are sceptical about the challenging pathway for Domino’s to return to attractive and sustainable profit growth amid an earnings slump in France, where it relied on too much discounting and a diner view its pizzas were low on quality, low visitation rates in Japan, and a dour economy in New Zealand that is forcing households to forgo takeaway food.

That scepticism gathered pace after the posting of Domino’s interim results that undershot analyst expectations and showed there was still plenty of work to be done, with shares sliding 13 per cent to an 11-year low of $28. The stock closed down 10.47 per cent at $28.89.

Domino’s shares have been crushed by several years of disappointing results and a string of profit warnings. The once high-growth multiples and its “market darling” status that sent its stock to almost $160 in 2021 have now worked in reverse to crash its market value.

Also not helping was weaker than hoped sales for the start of the second half, as same-store sales for the first seven weeks of the 2025 calendar year rose 1.5 per cent, half the pace of growth for the same period last year.

On Tuesday the pizza maker, which has operations in Australia, New Zealand, Asia and Europe, said sales for the first half fell 6.4 per cent to $1.165bn. Its flagship Australian arm did see an improvement in earnings for the first half, but overall same-store sales growth for its stores from Melbourne to Tokyo and Paris fell 0.6 per cent, against 1.3 per cent growth in the previous corresponding period.

Its pre-tax earnings of $100.6m was down 6.7 per cent, and in line with guidance at the recent trading update in February. Despite the lurch into a loss for the December half and weaker sales, Domino’s maintained its dividend at 55.5c a share, payable on April 2.

Bell Direct analyst Grady Wulff said the Domino’s outlook remained “murky”, with the results a miss to expectations.

However, she said there was a path to recovery for the pizza maker as long as it remained focused on its key strategic goals of closing down loss-making stores, restructuring its operations and boosting franchisee profitability.

“I think high growth is definitely achievable in this rate cut environment we are seeing,” Ms Wulff said. “They need to let go of loss-making stores, cut down on costs … and their message needs to be down pat. They need to be a core staple pizza producer, a leading producer of the world.”

She added that decades earlier Domino’s had been a leader in the field, especially in the use of technology and delivery, to supercharge its performance. Domino’s could make a return to its winning ways, but she doubted it could ever return to its previous high of a $160 share price.

“They really nailed the tech offering (before) and then slipped by the wayside.”

Citi analyst Sam Teeger said that, for now, Domino’s was taking necessary, but painful, hard decisions focused on cost-cutting.

“However, given this is the third round in less than two years, we are increasingly questioning whether the company could make the required improvements to its product offering to ensure it sufficiently resonates with customers to drive sustainable topline growth in its two key markets of Japan and France,” he said.

“We give the new management team the benefit of the doubt for now, but expect them to navigate this challenging time with a balance sheet that offers limited flexibility and potential loss of scale benefits from a smaller network.”

Domino’s has pledged to create a more simple and profitable business. Picture: Liam Kidston