Domino’s financials underwhelm market, bevy of issues in global franchisor

The global Domino’s pizza empire is spread a little thin in Asia as the embattled franchisor still reels from falling off a share price cliff earlier this year. The ASX did not immediately warm to Domino’s Pizza Enterprises’ full-year results on Wednesday, and by 1pm the stock was down 2.7 per cent. While an apparent run on pizza shops during the Matildas’ World Cup campaign was good for business in Australia, geopolitical issues in Malaysia and diving sales in Japan hurt the bottom line. The full-year results came in under market expectations, as net profit fell 1.9 per cent. Underlying earnings grew 3 per cent and sales rose 4.6 per cent to $4.1bn. Four-in-five Domino’s orders are now made online. Chief executive and managing director Don Meij said the results were an “important inflection point”. “After working through the peaks of inflation and reducing their cost base, franchise partners would be able to leverage additional sales to deliver a step-change in profitability,” he said. The 898 stores in Australia and New Zealand delivered pre-tax earnings of $124m for the year, up 10 per cent. “There are positive signs across our business but more work to do in order to our achieve our group franchise partner profit target of $130,000 per store,” Mr Meij said. The Matildas’ World Cup run sparked a big appetite for pizza in Australia, but European returns were relatively low on the back of a wildly successful doner kebab promotion in Germany the year prior. A 50.4c fully franked dividend takes the full-year dividend to $1.509 (down 3.7 per cent). Domino’s has offered a dividend reinvestment deal, in which the largest shareholder, Somad Holdings, has committed half of its dividends. A 30 per cent share price plunge in January was sparked by multiple issues, including difficulties trading in France and anti-US backlash to the war in Gaza in Muslim-majority Malaysia. Digesting the results on Wednesday, eToro market analyst Josh Gilbert said “it’s been a terrible 2024 for Domino’s”. “Weakness in Europe and Asia remains a drag,” he said. “Both these areas will need to improve if the business is to meet its sales targets for FY25. “Domino’s has already identified improvements in struggling regions such as France and Japan which, if executed correctly, should start to bear fruit in FY25,” Mr Gilbert said.