Domino’s returns fall short of target
MORE than $850 million has been wiped from the market value of Domino’s Pizza Enterprises after it missed its fullyear profit target and forecast a slowdown in sales growth.
The flag bearer of Australia’s fast food industry has revealed sales at its established European stores grew over the past year at about half the forecast rate amid troubles with its rollout in France.
It has also warned it is facing higher costs in Australia after pledging to increase staff wages.
And the group says an audit of its stores – launched when Domino’s franchises were embroiled in a wage underpayment scandal earlier this year – is taking longer than expected.
Shares in Domino’s closed at an 11-month low of $41.50 yesterday after plunging $9.61, or 18.8 per cent.
The slump cut the market value of the group to $3.7 billion.
Domino’s, which operates in eight countries, failed to meet its same-store sales targets in Australia, NZ, Europe and Japan for the year to July 2.
The biggest miss was in Europe, where like-for-like sales – a tally that strips out the effect of shops opening or closing – rose 2.8 per cent.
That was below the company’s forecast for growth of 5 per cent to 7 per cent.
Chief executive Don Meij said the shortfall was largely due to problems with the group’s French business, which suffered six months of online ordering troubles and a value range that did not resonate with the French.
“Both have now been fixed,” he said.
“We had some address input issues with French abbreviations and slang so customers would be coming to our site and it would be telling them that we weren’t available to them.”
Domino’s warned it faced a slowdown sales in the six months to December – the first half of its new financial year – and slower profit growth for the full year.
That will come as the company lifts wages for employees as it continues to negotiate a new agreement with the union for retail workers.
Australia and NZ – Domino’s biggest market by earnings – had a 13.6 per cent lift in same store sales, below its forecast for 14 per cent to 16 per cent.
It made a net profit of $102.9 million in the year.