Domino’s attributes record profits to innovations and new initiatives

Posted by AFN Staff Writers on 11th February 2015
Domino’s attributes record profits to innovations and new initiatives
Domino’s attributes record profits to innovations and new initiatives

Pizza restaurant group Domino’s Pizza Enterprises Limited (Domino’s) has reported its strongest profit for a half-year period, with a Net Profit after Tax for the first half of the 2015 financial year of $29.1 million, up 44.2 per cent on the prior corresponding period.

Domino’s has attributed the strong profit growth to “digital and product innovation, record store count growth, overseas earnings from Japan, economies of scale and crowdsourcing initiatives”.

Financial highlights

  1. The Company said a strong focus on operations in all regions resulted in an EBITDA for the Group of $60.0m, an increase of 41.2 per cent on the prior corresponding period.
  2. Australia and New Zealand (ANZ), Europe and Japan each set new store opening records with a total of 92 new stores added to the Group network. The Group achieved Same Store Sales (SSS) growth of 8.6 per cent, which included the highest first half ANZ SSS in four years of 10.6 per cent.
  3. Domino’s attributed considerable success to its $4.95 Cheaper Everyday promotion and the launch of Pizza Mogul in Australia, as well as continued sales momentum in New Zealand.
  4. The Company said the results also confirmed Europe was on track for its first double digit EBITDA margin year with EBITDA up 138 per cent on the prior corresponding period (constant currency underlying basis). This has been attributed to material profit growth delivered by the momentum of a restructured European management team.
  5. Strong profit growth in Japan due to store count growth, along with excellent food and labour control in corporate stores, saw Domino’s Pizza Japan (DPJ) trade to expectations and record EBITDA growth of 27.2 per cent (constant currency, July to December 2014, underlying basis).

CEO confirms profit expectations were met

Domino’s Group CEO and Managing Director Don Meij said the first half financial performance was “unprecedented” and positioned the Company well to deliver strong FY15 results to shareholders.

“We have worked hard this half to deliver strong sales assisted by the launch of our successful $4.95 Cheaper Everyday campaign,” Mr Meij said. “This price leadership, combined with strong store growth, has contributed to increased customer counts and our strongest SSS in four years,” Mr Meij said.

“The momentum in Europe has also continued with our strongest SSS in both France and The Netherlands reported in three years,” Mr Meij said. “This has been achieved despite rolling a VAT increase in France and experiencing a tougher than usual macro environment,” he said.

Mr Meij confirmed DPJ’s results were in line with expectations with total sales growth for half year reported at 15.8 per cent.

“DPJ enjoyed another record sales month of ¥4.4 billion in December 2014, not to mention the new monthly sales records achieved across 147 stores in the same month,” Mr Meij said. “We also opened a record 34 new stores in Japan which included opening in three new regions – Okayama, Fukushima and Nara,” he said.

Product offering and digital developments

Domino’s launched a number of key digital initiatives to allow customers to interact with the brand. Among these crowdsourcing initiatives was Pizza Mogul – a platform launched in Australia in July 2014 leading what the Company has called the “me-tailing” revolution.

With more than 55,000 “Moguls” registered to date and an impressive 160,000 pizzas added to the menu, the Mogul website and App pays customers to promote their pizza creations thereby driving sales and rewarding customer engagement and innovation. The more they sell, the more they earn.

“While a number of significant digital projects are being developed behind the scenes, this half-year period was heavily focused on our People Powered Pizza ethos and branding mantra,” Mr Meij said. “Our progressive Pizza Mogul platform has been a major sales driver for us but it’s also a great example of what can be achieved when a company allows customers to champion their brand,” he said.

“We are seeing huge amounts of user-generated content being produced by our passionate pizza lovers and this goes beyond our expectations,” Mr Meij said.

The popular Square Puff Pastry was also reintroduced in ANZ. Domino’s said this pastry was a “crowd pleaser” amongst social media fans who were the driving force behind its return to the menu.

“A lot of the focus in ANZ has been about giving customers what they want and expanding our core product offering,” Mr Meij said. “This included the launch of new menu items such as the Chili Lime Pulled Pork pizza, candy infused Lava Cakes, the expansion of our extra value range and an increased chicken range,” he said.

Europe online ordering system

In Europe, the DPE global online ordering system, a strong focus on SMS marketing and the launch of the Domino’s Pizza Chef has had a material impact in The Netherlands including record results and digital orders now accounting for more than 60 per cent of sales.

“Our global OLO is also now fully implemented in Belgium and this is set to help facilitate online sales growth in the second half,” Mr Meij said.

Domino’s Japan campaigns

Domino’s Japan continued to trade to expectation, despite rolling strong sales from the same time last year.

The Company said this had been assisted by the launch of a number of strong digital platforms including the HTML ordering system and social initiatives.

“A range of Smartphone-only promotions, along with Facebook campaigns have been used to stimulate and drive customers to online platforms,” Mr Meij said.

New products launched

In addition to a number of crucial digital projects in Europe and Japan, a wide range of new products were added to the menu such as the popular Sweet Chevre (Goats Cheese & Honey) In France and Belgium, Cheesy Crust in Belgium, Hot Dog Stuff Crust in The Netherlands and a new seafood pizza in Japan.

Further digital developments

Domino’s recently launched an extension of the Domino’s Pizza Tracker in Australia to now include Android Watch. The Pizza Tracker allows customers to “Chromecast” their Pizza Tracker to their TV.

A sophisticated Quick Ordering service to reduce the number of clicks on OLO has also been launched.

Mr Meij said the next reporting period will see more of these technology projects rollout across the various markets including GPS Tracker and the rollout of PULSE in France and Japan.

“In Europe we continue to aim for our first double digit margin year in FY15 and are on track to achieve this result,” Mr Meij said.

“It is expected that better value strategies, increased market share and continued strong store growth will drive Domino’s Pizza Japan into number one position in the pizza delivery segment before the end of FY15,” Mr Meij said. “This will see Japan with over 380 stores with the goal to open DPJ‟s 400th store prior to the Company’s 30th anniversary in September,” he said.

Guidance update

As a result of the strong results achieved year to date, combined with the continued momentum in the first five weeks of the second half, Domino’s has further upgraded its full year Guidance across all areas.

“The first half of the year has yielded strong profits across the Group and as a result, we have further upgraded our EBITDA growth Guidance to 30 per cent and our NPAT growth Guidance to 32.5 per cent (compared to FY14 Underlying),” Mr Meij said. “We are also increasing our Group SSS to be in the region of 6-8 per cent and our Net Capex Guidance growth to $70-80m. This increase is largely associated with financing franchisees in Europe along with store count growth and relocations in Japan,” he said.

Due to the strong start to the year, the new store openings for the Group has also increased from 175-185 to 180-200 new stores. This will also include the Company’s 1,500th milestone store opening planned for later this year. Domino’s currently has a network of 1,435 stores, including 648 stores in ANZ, 427 stores in Europe and 360 stores in Japan.