Another disappointing result from Domino’s Pizza Australia has seen the shares slide more than 4% on a day the wider market sold off by around 1%.
The market sell-off was more to due to new fears about the global economy and Donald Trump’s trade wars and inability to understand what his tweets and flip flops are doing to investor confidence.
The 4.3% slide in the Domino’s was reportedly due to the removal of underperforming franchisees in 2018-19 – the ones who reportedly underpaid their staff.
But a more convincing reason was a weak performance in the core Australia and New Zealand markets.
Overall same-store sales growth slowed to 3.6% from 4.3% a year ago, toward the bottom of the company’s 3.0% to 6.0% guidance range.
This was weighed down by softer than expected local figures, with the addition of the Extra Large (XL) pizza range in Australia and NZ not enough to stop same-store sales growth slowing to 2.2% from 4.5% a year ago.
That looks like Domino’s is now caught up in the general retail malaise in Australia.
The shares ended the session down 4.8% at $42.28.
Earnings before interest, tax, depreciation, and amortisation (EBITDA) eased to $127.9 million for the last financial year, despite the pizza retailer reporting a 2.4% rise in sales on a same-store basis.
Underlying group revenue, which includes Domino’s stores across Japan, Europe, and New Zealand was up 24.4% to $1.43 billion, and underlying EBITDA rose nearly 9% to $282.4 million.
CEO Don Meij (who was paid a bigger salary than the year prior, receiving nearly $100,000 more along with a $150,000 bonus) claimed the company had made a number of “short-term decisions” to provide support to struggling franchisees where needed, which led to the decline in profit.
“Domestically our margins, and as a result our EBITDA, were compressed because, in line with this focus, we increased the number of corporate stores (as a percentage of our network) as underperforming franchisees have left the business,” he said.
The company said a total of 22 of those franchisees left the system and in some cases, those franchisees left “as a result of our compliance regime identifying deliberate underpayments of team members”.
Domino’s will pay shareholders a final dividend of 52.8 cents share, up from 49.7 cents a share a year.
Total dividend for the year is 115.7 cents a share against 107.8 cents.
Domino’s no longer provides year-on-year guidance but said it expected same-store sales to grow 3.0% to 6.0% in the next three to five years, and store count to grow by 7% to 9%.
Judging by this year’s results, meeting that target is going to be a bit of a battle.
