International pizza chain Domino’s Pizza Enterprises Limited has revealed a 74 per cent fall in full-year net profits over the last financial year.
The company’s 2022-23 Annual Report, released on Wednesday, pointed to cost pressures and soaring inflation as the driving factors behind the grim outcome.
Headquartered in Australia, the company operates franchises in Australia, New Zealand, Belgium, France, the Netherlands, Japan, Germany, Luxembourg, Cambodia, Taiwan, Malaysia and Singapore.
In June Domino’s revealed it would also be closing all its stores in Denmark, citing “breached public trust with food safety violations” by the previous owners, from whom Domino’s acquired the stores in 2019.
Domino’s chief executive Don Meij said 20 per cent of the company’s staff would be cut globally, equating to about 200 people.
He said margins were ultimately affected by the company’s “inability to pass through ingredient cost changes as we ordinarily do”.
“While we anticipated the increasing cost of doing business for Domino’s stores, through higher labour, ingredients and energy, the scale and pace of these increases meant Domino’s leadership needed to adjust our pricing and cost base faster than in our history,” he said.
Meij said Domino’s had attempted to offset inflation by balancing price increases with customer growth via a “value equation”.
The latest figures follow a “reduced frequency” in customer ordering, Meij conceding “we did not always get our pricing right”.
Although Domino’s absorbed some ingredient price increases, earnings were impacted by further reductions in food volumes.
Meij said the company had been too slow to address the flow-on effects of inflation and consequently made mistakes along the way.
“For example, some of the changes we made including the introduction of a delivery service fee did not resonate with some customers and over time they ordered less frequently,” he said.
“We have heard this feedback loud and clear and have now removed the majority of these fees.
“That said, some pricing decisions were accepted by customers, such as slightly increasing the price of our value range, while still providing amazing value.”
Although sales across Asian stores for the start of fiscal 2024 fell nearly eight per cent, below expectations, Domino’s saw sales growth of 6.6 per cent across both Europe and ANZ.
Despite delivering a lower than expected return on equity of 26.5 per cent, Domino’s chairman Jack Cowin said the company was entering Financial Year 2024 in a “strong position”.