Australia, insurance, car, home, live, holidays

Domino’s Pizza:Cheese prices are starting to soften.Credit:Luis Enrique Ascui

“It’s interesting ... even just a month ago,[I would have said] ‘wow,we’re expecting another round of material inflation in this next half’,” Meij said. “But now,actually,I’m now expecting deflation in soft commodities.”

Cheese,which is “by far” the biggest cost for the business,has come down to its usual average price,according to Meij. So has wheat,and this is expected to have flow-through effects down to meat toppings,as grain is one of the major costs in producing meat.

“In the near term,it would appear,we don’t even have to worry about[inflation] because it’s actually going the other way,” he explained.

Domino’s’ strategy to combat inflation has involved a push to boost sales,raising prices for some products and providing a greater selection of affordable options through its expanded $8 Value Max range,which includes some items previously on the $5 value range. Its recently launched Burger joint pizza range has also helped to drive higher sales.

“We have had to slightly increase some of our prices and are likely to have to increase some more,” said Meij. Australian customers have so far responded well to the new $6 delivery fee,which the company is now looking to roll it out in other countries,he added.

The Domino’s chief pinpointed Australia’s worker shortage as the greatest challenge for the ASX-listed business as it looks to expand further. The nation’s unemployment rate is at 3.4 per cent,the lowest level in about four decades,and projected to drop even lower.

“One downside of the age of delivery is there’s not enough people to deliver. So we expect our biggest tension over the next decade will be a shortage of delivery drivers,” he said. “Our strategy to that is this:the most efficient company will win – the companies that can do the most deliveries per hour will win.”

Don Meij,CEO of Domino’s Pizza Enterprises.Credit:

The pizza franchise expects to keep growing by making deliveries more efficient,opening more stores and looking at “suitable merger and acquisition opportunities”.

Domino’s plans to expand into Malaysia,Singapore and Cambodia,and intends to bring the number of its stores in Asia from 2400 to 3000 stores by 2033. It opened 450 new stores in the 2022 financial year.

The company,which also operates in Asia and Europe,on Wednesday said its underlying net profit fell 12.5 per cent to $165 million for the 2022 financial year,dragged down primarily by lockdowns in France and Japan. Earnings before interest and tax,depreciation and amortisation (EBITDA) dropped 6.4 per cent to $396.5 million.

Australia and New Zealand was the only market in the Domino’s group to improve operating profits with 2.8 per cent growth;Europe and Asia EBIT slid by 11 per cent and 23.1 per cent,respectively.

The company will pay a 70 per cent franked final dividend of 68.1¢ per share on a proposed date of 15 September,20 per cent less than last year.

In a note to clients,Jarden analysts said Domino’s results were weaker than expected given Europe’s drag on the business and would prompt analysts to cut their forecasts. Investors,however,appeared pleased with the results:Domino’s shares closed the session 7.6 per cent higher at $72.15.

The Business Briefing newsletter delivers major stories,exclusive coverage and expert opinion.Sign up to get it every weekday morning.

License this article