Domino’s shares in freefall as pizza giant dishes up heavy loss amid store closures

Shares in Domino’s Pizza were in freefall after the fast-food giant revealed hefty restructuring costs related to mass store closures had delivered a $22.2 million loss in the first half of the financial year.

The loss stood in stark contrast to a profit of $57.8m a year ago as the company was smashed by $115.6m in one-off costs, with impairments on company-owned stores to be closed making up the lion’s share at almost $81m.

Other one-off costs included $11.3m in writedowns on assets, land and buildings, as well as $6.6m in restructuring costs.

Shares in the company — which has more than 3700 stores across Australia, New Zealand, Europe and Asia — plummeted 10.5 per cent to $28.89.

Earlier this month, new chief executive Mark van Dyck made his first major move in the role after taking over from long-serving boss Don Meij by announcing the closure of 205 loss-making stores — 172 are in the Japanese market.

At the time, Mr van Dyck conceded the company grew too quickly, with many of the stores targeted for closure opened during the pandemic, fuelling a surge in sales. Those stores have since struggled as demand declined and costs and inflation soared.

“At our recent trading update we announced the first outcomes of a detailed operational and financial review to create a simpler and better Domino’s, including taking decisive actions to close loss-making stores and deliver savings to reinvest in growth,” Mr van Dyck said on Tuesday.

“Those steps were the first in a comprehensive business review, which is ongoing, designed to improve profitability, strengthen franchise partnerships, and position the business for long-term sustainable growth and improved shareholder returns.”

Mr van Dyck later told analysts it wasn’t about a “change in strategy, but a change in execution”.

“Some of our markets simply aren’t delivering at the same level as our top markets are showing,” he said.

“There is no doubt consumers are under pressure globally with sustained cost-of-living pressures affecting (quick service restaurants) broadly.

“But where we’re getting the customer proposition right, we’re growing share, including in large markets such as Australia.”

Mr van Dyck said store closures in Japan “do not reflect and should not be interpreted as a statement of our long-term opportunity to grow, including new store openings”.

Domino’s reported revenue of $1.17 billion, down 6.4 per cent, while pre-tax earnings fell 6.7 per cent to $100.6m.

Its Australian and New Zealand division delivered earnings growth of 7.6 per cent to $67.7m. But this was offset by challenges in Europe and Asia, where earnings fell 11.1 per cent to $32.3m and 19 per cent to $17m, respectively.

Mr van Dyck said the business still had significant growth opportunity.

“There are a number of key priorities, putting the consumer at the centre and simplifying to deliver quality every time,” he said.

“Nothing is off the table and we are considering where is the right place to invest capital to make sure we get maximum shareholder returns.”

Domino’s declared an unfranked interim dividend of 55.5¢ a share, unchanged from last year.