Domino’s has announced its weakest half-year profit in more than a decade.
This resulted in the fast food giant’s decision to downgrade its second-half same-store sales guidance in Australia.
Domino’s CEO Don Meij said fiscal 18 is a year of continual improvement in operations, food and digital technology for the business, and that the second-half would deliver stronger growth.
“As we enter H2 our targets are designed to set net benchmarks for performance, which we believe are achievable based on our forecast improvements in same-store-sales growth across our network,” he said.
Domino’s ANZ CEO Nick Knight said sales in its biggest market were “slightly softer” than expected. Fast food giant reported a 7 per cent increase in net-profit after tax (NPAT) to $62.9 million. ANZ sales increased by 7.1 per cent to $557.8 million for the half, up 3.7 per cent on a same-store sales basis (SSS), less than-half of HY17 SSS growth, while earnings before interest, tax, depreciation and amortisation (EBITDA) was up 16.2 per cent to $64.1 million.
The pizza giant reaffirmed its 20 per cent NPAT growth guidance for the full-year, but downgraded its ANZ same-store-sales guidance for FY18 from 7-9 per cent to 6-8 per cent after revealing that SSS figures for the first five weeks of the second-half were up 5.9 per cent. Net Profit after one-off costs rose 18.2 per cent to $59.8 million.
Fast food giant’s European sales increased by 12.6 per cent to $468.5 million on the back of the acquisition of Hallo Pizza in Germany last year, while SSS increased by 7.7 per cent on the prior corresponding period.
Australia charts second-half rebound
While same-store-sales growth slowed in ANZ for the first-half, Knight remained confident that the second-half will deliver an improvement for local operations, with new products and ingredients underpinning confidence.
“The result was slightly softer than we anticipated, but we remain committed to exceeding our customers’ expectations with a menu and customer experience that listens to, and exceeds, our customers’ cravings,” he said.
22 new stores were added to the ANZ network in the first-half, bringing total store count to 799. Domino’s also said on its franchisee update that a nationwide assessment is close to completion, with four franchisees (with 15 stores) have been issued breach notices.
Three external audits are still underway, and it was not immediately clear whether the four franchisees operated 15 stores each, or 15 stores in total. Domino’s is also stepping up its efforts to safeguard franchisee profitability, revealing that it is assessing trials with order aggregators to test whether they add to incremental sales.
The plan could see Domino’s partner with Deliveroo, Uber Eats and Foodora. Fast food giant also said it will increasingly target the lunch market with its 20-minute delivery guarantee.
Europe up on French recovery
Domino’s performance in Europe is better which was driven by a recovery in France. It was plagued by issues with its online platform. It said those problems have been resolved today, delivering 40 per cent year-on-year online growth, representing more than half of total sales in France.
During the first-five weeks of the second-half, trading across Europe, which also includes Belgium, Germany and the Netherlands, was up 6.9 per cent on a SSS basis and is expected to be between 6-8 per cent for the full-year. There are now 891 stores trading in Europe with the addition of 115 Hallo Pizza stores now converted to the Domino’s format.
