Domino’s Pizza has announced a 17 per cent fall in profits.
Chief executive Don Meij said same store sales growth in Australia and New Zealand was softer than expected, falling from 17.4 per cent a year ago to 3.7 per cent in the half year just completed.
But he said sales a year ago were boosted by the company’s largest menu change in eight years.
Domino’s Pizza shares have plunged after the company reduced its sales growth guidance for Australia and New Zealand
While the company reduced its sales growth guidance for Australia and New Zealand, it was not all bad news for the pizza giant.
Domino’s made a net profit of $58.7 million in the six months to December 31, up 17 per cent from the same period a year earlier, as overall sales rose by four per cent, on a same store sales basis.
But the pizza chain has lowered its full-year same store sales growth forecast for its stores in Australia and New Zealand to a range of six to eight per cent, from the previous forecast of seven to nine per cent.
Sales forecasts for its operations in Europe and Japan remain unchanged.
‘Let me make it clear that we are still a high growth company and we will be a high growth company for a number of years to come,’ Mr Meij told reporters.
After adjusting for the costs of a share buyback, the company’s first half year profit growth was seven per cent, and sales were weaker than expected in Japan due to a poorly received menu change.
Chief executive Don Meij said same store sales growth in Australia and New Zealand was softer than expected
But Domino’s has maintained its forecast of full-year net profit growth of around 20 per cent.
Analysts at Citi said the company faces a challenging second half to meet its forecast, given it has downgraded its sales growth guidance in its biggest market.
‘Domino’s continues to execute well, but with so many geographies, it is challenging to deliver fast growth across all segments at the same time,’ the Citi analysts said in a note.
Shares in Domino’s were down $4.07, or 8.2 per cent, at $45.43 at 1235 AEDT.
Domino’s said same store sales in Australia and New Zealand rose 5.9 per cent in the first five weeks of the second half of the financial year.
‘Let me make it clear that we are still a high growth company and we will be a high growth company for a number of years to come,’ Mr Meij (pictured) told reporters
But Domino’s has maintained its forecast of full-year net profit growth of around 20 per cent
Mr Meij said franchisee’s profits are expected to be higher than in the prior year despite increased labour costs due to a new enterprise bargaining agreement, which includes weekend and late night penalty rates.
The impact of the higher wages is expected to be below two per cent of franchisee sales, on average, slightly below the company’s original forecast.
Mr Meij said Domino’s has been operating on the new agreement in the past three weeks and the higher wages have led to a surge in applications for store and delivery jobs.