Meij signals a big shakeup for Domino’s to revive its fortunes
Domino’s will walk away from Denmark, significantly reduce its corporate store ownership and embark on an efficiency drive after revealing its second-half earnings would be flat.
Domino's Don Meij has revealed a shakeup of the business (pic: Domino's)
The company, whose share price has fallen 30 per cent this year, said it would reduce its corporate store ownership by between 15 and 20 per cent by closing underperforming stores and accelerating the refranchising of others.
Its shares fell another 11 per cent when the market opened this morning but pared back some of those losses in mid-morning trade, but on heavy volumes. Its shares are now at a four-year low of $41.63. During the pandemic the shares reached above $160.
It said there were about 65 to 70 underperforming stores that would close because they would not reach sustainable levels of profit in the near term. Another 75 stores that could be revived would be franchised.
Up to $20 million a year would be saved under the strategy.
It would also close southeast Asian commisaries, an IT business and its Australian construction and supply subsidiary as well as review business units to make savings.
The company claimed its program would save it up to $59 million annually.
It came as it revealed same-store sales had improved in the fourth quarter but store openings in 2024 would be below the medium-term outlook of between 8 per cent and 10 per cent. It has maintained its forecast of 7100 stores by 2033.
Domino’s said it intended to deliver materially higher profitability in 2024 and the medium term, both through an improvement of core business delivered through higher sales and initiatives which included the closure of its Denmark business, which it had bought from receivers in 2019 and was tarnished by bad publicity and food safety violations under the previous owners.
Managing director Don Meij said the decisions would immediately deliver a stronger business.
“As these initiatives are completed and deliver savings, we intend to reinvest approximately one third of these savings to stores as we reinvest in the franchise network base,” he said.
“This is the right time for us to redesign for future growth. We are taking deliberate action to bring more focus to our business removing distractions and maximising the benefits of our global reach and scale.”
He said the Danish business had made substantial improvements but the legacy of damage was too great.
