Domino’s place focus on quality
AUSTRALIA’S biggest pizza chain will next week complete the rollout of in-store cameras that use “artificial intelligence” to help improve quality.
After delays in the rollout, Domino’s Pizza Enterprises will finish installing the Pizza Checker system across its Australian store network by Monday.
Domino’s will launch and start marketing the technology by the end of next week as it looks for a fresh way to jumpstart sagging sales growth.
The system uses in-store cameras and sensors that scan and monitor pizzas during preparation to ensure they are made to specification and toppings are distributed well.
Domino’s Australia and New Zealand chief Nick Knight has previously said the group was hoping to have the rollout – which was announced in November 2017 – complete last year.
In a presentation to investors this week, he said 670 stores in Australia and New Zealand now had the technology and it would be installed in the remaining stores in coming days.
The chain had about 820 outlets in Australia and New Zealand at the end of last financial year.
More than one million pizzas had been analysed using the technology, and initial results had shown “improvements in product quality scores” and customer satisfaction, Domino’s said.
Sales growth at Domino’s Australian and New Zealand stores has slowed in recent years.
In the six months to last December, sales grew 3.5 per cent, compared with growth of 3.7 per cent in the same period a year earlier, and 17.4 per cent a year before that.
Analysts who joined the investor presentation this week said Domino’s faced headwinds going into next financial year.
These were linked to difficulties expanding in France, the purchase from franchisees of underperforming stores in Australia, and concerns customers in Japan would take time to warm to a new menu there, the analysts said.
Citi analyst Craig Woolford said the rollout of Pizza Checker in Australia was a positive.
Mr Woolford said Citi analysts doubted it would have “a ‘big bang’ impact on customers but (it) will improve product credibility”.
No trading update was provided at yesterday’s presentation, leaving analysts to assume Domino’s was keeping to previous profit forecasts.
Deutsche Bank analyst Michael Simotas said there was “nothing materially new” in the presentation and “we still see downside risk”. “We also believe Australia/ New Zealand (profit) margins will remain under pressure given the large share of the profit pool taken by the franchisor,” Mr Simotas said.
Mr Woolford said Domino’s was still underperforming in France and Australian store repurchases from franchisees would “be a drag”.
“We expect Europe sales trends are sluggish and margin expansion will be modest in the second half,’’ he said.
UBS analyst Ben Gilbert described the update from Domino’s as “incrementally positive”.
“The key theme from Domino’s business update was that momentum should improve into fiscal 2020 across the business,” he said.
“While the absence of a fiscal 2019 trading update could be seen as good news, we note June is a key trading period for Europe, but on balance no update suggests Domino’s remains comfortable, a positive.
“The key for Domino’s in our view, is improving momentum in Europe.’’