Dominos fall: Meij vows recovery as strategy failures, inflation hit profit

Domino’s Pizza has announced about 200 global job cuts, a delay in reaching its medium-term store count while executives will be forced to “double-hat” with extra functions after its net profit crashed 70 per cent to $40.6 million.

Aug 23, 2023, updated Aug 23, 2023
Domino's boss Don Meij has revealed a shakeup of its business (Photo: Crikey).

Domino's boss Don Meij has revealed a shakeup of its business (Photo: Crikey).

The company blamed rising inflation and the economic downturn in key markets, but the company’s share price has also slid from a high of $75 in January to $48 yesterday.

However, its decision to tackle its costs and signs of a recovery were seen as reasons for a big jump in the price following the profit announcement. Shares jumped 8 per cent to $52.25.

The company’s full-year dividend of 110 cents was down almost 30 per cent.

The company said margin recovery was starting in Europe and Australia and New Zealand but any earnings growth in 2024 would come from structural savings. It was “cautiously optimistic” about further margin recovery.

The result follows a decision to increase menu prices “in the face of extraordinary inflation”, but the scale and size of price increases meant that not all of its price changes were tested in the usual manner and this led to to reduced sales in some areas.

Managing director Don Meij said the scale and pace of cost increases meant pricing adjustments that were done at a faster pace than at any time in the company’s history.

“Without decisive action, we faced the prospect of inflation eroding the entire profit pool for both Domino’s and our franchise partners. In some cases the price increases we passed through to our customers, or the way we do, did not resonate with more price-conscious customers who typically ordered delivery,” he said.

That included a delivery service fee and Meij said the company was now reversing the effect of those decisions and it had removed the majority of the fees.

“I want to be clear to our customers facing cost-of-living pressures, we do not expect to pass on pricing increases this year,” he said.

The company had already started a restructuring to cut costs and Meij said there was an expectation of between $50 million to $60 million in 2024. It has targeted savings of up to $94 million in 2025.

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“Wherever a global function sits within a market, the majority of our leaders will now double hat so there is one decision maker and my role is no exception. Effective immediately I will be acting as both group and ANZ chief executive for Domino’s,” he said.

“Sadly, these changes mean that we expect a number of staff in our support offices in Australia and internationally to leave the business in coming months, after we work through local consultation requirements.”

He said executives had previously always “double hatted” and it was only in recent years had the job functions been split.

He said the decision would mean executives were “on the tools” and not just getting advice from others.

For the first seven weeks of the financial year, network sales growth was up 12 per cent and same store sales were up 2.8 per cent.

The company said growth would come from volume and new low-cost products would be launched.

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