Domino’s Pizza
(ASX:DMP) shareholders are set to experience a 30% reduction in their final dividend as the once high-flying fast-food group faced a significant setback in the fiscal year ending June 30. Despite a modest uptick of 2.2% in sales to $2.37 billion, EBIT plummeted by over 23% to $201.7 million, and after-tax statutory profit declined by 25.7% to $165 million.
The company attributed these declines to escalating costs and weakening demand, stating, "Total sales growth came through higher menu prices but fewer meals sold."
Domino’s aims to achieve cost savings of $30 to $40 million through various initiatives, including the reduction of the final dividend to 42.6 cents per share. This move contributes to a 25% decrease in the full-year dividend, which now stands at $1.10 per share, compared to $1.465 per share in the previous year.
Group CEO Don Meij acknowledged, “Because of the speed at which we needed to respond to inflation we didn’t always get the 'value equation' right." He admitted that certain changes, such as introducing a Delivery Service Fee, did not resonate well with customers and resulted in reduced ordering frequency. The company has now eliminated most of these fees based on customer feedback. Meij clarified that the goal is to achieve a balance between offering value to customers and ensuring profitability for franchisee partners.
Meij emphasised that despite cost-of-living pressures, the company does not anticipate passing on further price increases this year. He invited both existing and potential customers to experience Domino's value offerings.
Looking ahead to 2023-24, Domino’s shared a mixed outlook. The company reported robust sales growth in Europe (+6.6% in same-store sales) and Australia/New Zealand (+6.6% in same-store sales), driven by efforts to boost volumes for enhanced unit economics and group profitability.
However, Asian sales growth (-7.8% in same-store sales) fell below expectations. The company cited challenges in applying sales strategies that have succeeded in other markets, partially due to less frequent customer ordering behavior.
Meij concluded, “We believe our pricing for customers now appropriately balances the costs for our stores, while ensuring we deliver customers ultimate value. The key for our improved performance in FY24 is increasing the number of customers we serve each week."
