Domino’s net profit drops 74%
The international chain is also planning to downsize by as much as 20%.
Domino’s net profit fell by 74% for the full year ended 2 July 2023.
According to the company’s annual report, network sales grew by 2.2%, heavily offset by inflationary pressures. According to Group CEO and Managing Director Don Meij they have managed to offset inflation by balancing price increases with customer growth.
“Where we did not, we grew sales through increased price alone, mirrored by a customer count decline that reduced volumes,and therefore margins, for our Franchisee Partners and Domino’s,” Meij said in a statement.
Despite network sales growth, Domino’s earnings before interest and tax dropped by 23.3% compared to the year before.
“This reflected the volume decline in stores flowing through to our warehouse margins. Domino’s margins were also affected through our inability to pass through ingredient cost changes as we ordinarily do, following some suppliers declaring force majeure on supply contracts at short notice, largely due to regional impacts of conflict in Europe, such as spiking energy prices,” Meij said.
Meij said that some of their strategies to mitigate inflationary pressures such as delivery service fees in Australian and New Zealand markets did not resonate with more price-conscious customers who typically ordered delivery.
“These customers reduced their frequency over multiple purchase cycles, a delayed effect that we subsequently identified and have been addressing over the second half of the Financial Year,” Meij said.
Before the end of the financial year, Domino’s embarked on several cost-cutting measures one of which exiting the Denmark market as well as its Construction and Supply subsidiary in Australia.
The company is also planning on downsizing its current corporate store network by 15% to 20%.