Domino’s falls short of guidance despite record profit

Domino’s Pizza Enterprises has achieved a 15 per cent increase in net profit after tax to $136.2 million in FY18, a year which saw the company add almost six new stores a week.

All markets saw positive growth on a same-store-sales basis in the year, with sales rising 4.5 per cent in Australia on a same-store basis, 5.7 per cent in Europe and 0.9 per cent in Japan.

“Less than four years ago we surpassed $1 billion in sales, and this year Group Network Sales reached $2.59 billion,” Group CEO and managing director Don Meij said.

“We delivered positive growth in all markets but after consecutive years of significant and compounding growth, our bar for success is even higher.”

Despite reporting growth, Domino’s still fell short of its greatly speculated guidance targets, reflecting in poor market confidence.

A sharp fall at the opening of trading saw the company’s stocks down12 per cent to $46.15 at 10:35am (AEST), before steadying.

Online pizza sales jumped almost 20 per cent year on year, reaching 63.9 per cent of total group sales, at $269.5 million.

However, Meij said the positive growth results reinforce internal confidence in the business, citing the fact that franchisees are opening new stores and building their businesses, even the Modern Fast Food Industry Award has brought uncertainty.

“We are proud of our franchisees having implemented this significant change, which means our team members are paid rates among the highest in our industry, including penalty rates and mileage allowances, which they deserve,” Meij said.

Domino’s CEO of Australia and New Zealand Nick Knight said the company was focused on new products and digital innovation, including Domino’s Pizza Checker and Project 3-10, which gave the business a significant competitive advantage.

Looking Forward

Ongoing growth over the longer term is achievable, according to Meij, and Domino’s expects to grow its share of the pizza and wider fast food market, with compounding growth in the range of 3 to 6 per cent.

Meij said stores have embraced Project 3-10, an initiative to have orders ready for pick-up in three minutes and deliveries made in 10 minutes from the time of order.

“Stores are sharing their lessons and challenging each other to improve their operations, setting records in multiple markets for the lowest average delivery times for a week,” he said.

“This also means we need more kitchens, closer to our customers, to satisfy existing and future customer demand, and we affirm our long-term store count forecasts, after surpassing the forecasts we set seven years ago.”

The company expects to build between 225 and 250 stores in FY19, according to Meij, with 12 stores having been opened in the period’s first six weeks already.

This article first appeared on Inside Retail, a sibling publication to Inside Franchise Business.