Domino’s chief executive Don Meij. Picture: Annette Dew
Domino’s chief executive Don Meij. Picture: Annette Dew

Domino's $1 billion fail

DOMINO'S has blamed technology glitches in France for a disappointing earnings miss, which caused its shares to plunge more than 20 per cent in early trade on Tuesday.

Shares in the pizza giant plunged as low as $39.50, down from their previous close of $51.11, wiping more than $1 billion of the company's valuation to $3.51 billion. By midday AEST Domino's shares had recovered some of their earlier losses to $43.93, but were still down more than 14 per cent.

The pizza giant lifted its full-year net profit by 24.8 per cent to $102.9 million, missing its earnings forecast despite double-digit sales growth in Australia, New Zealand and Europe.

Group revenue topped $1 billion for the first time, up 15.4 per cent to $1.073 billion, while underlying net profit grew 28.8 per cent to $118.5 million.

"I acknowledge our results, while strong, did not reach the guidance we set," Domino's chief executive Don Meij said in a statement to the ASX. "This was largely due to the delay in rectifying some issues with our online platform in France, and the initial response in H2 to our value range offering in France, which did not meet our expectations - both have now been addressed.

"We set high standards and we did not reach those high standards. I am confident we have the right strategy, and structure, in place - this has delivered, and will continue to do so, increasing sales and improving profitability in what is a high-growth business."

The company will pay a partially franked dividend of 44.9 cents per share, bringing the full-year dividend to 99.3 cents per share, a 26.6 per cent increase on the previous year. Domino's has also announced a share buyback of up to $300 million.

Speaking to news.com.au, Mr Meij said the "teething issues" in France related to inputting delivery addresses the speed of the site, problems which "took us longer than we thought to identify and correct".

Meanwhile, Mr Meij defended the company's free pizza giveaway last week which left thousands of customers frustrated after the site crashed.

To promote the launch of its new premium range, the pizza chain handed out 10,001 free pizzas on its Facebook page, a response to rival Pizza Hut giving away 10,000 free Margherita pizzas, which in turn was sparked by the news - and subsequent backflip - that the classic pizza would be "deleted" from Domino's menu in the latest shake-up.

Many customers expressed their outrage after logging on at 4pm only to be met with various error messages. "It taught us a lot about the size and scale of interest in something like that," Mr Meij said. "Next time around we'll make sure the bandwidth is lifted."

He said there were 6000 free pizzas given away in the first five minutes, and Domino's gave away an additional 500 "in good faith" to apologise to customers who hadn't been able to access the site.

Mr Meij dismissed complaints from customers, some of whom said they would "never buy from you again". "That's the reality of social media," he said. "There are only so many free things you can give away. There were also a lot of people very happy."

He added that he was taken aback by the strong reaction to the news the Margherita was being removed from the menu. "We were very surprised at the passion behind a pizza that doesn't sell," he said. "Maybe we should tell people we're deleting the BBQ meatlovers."

Domino's has also confirmed it is trialling "incrementally" smaller pan sizes in some of its restaurants. Announcing its full-year results on Tuesday, the company said it was part of an "ongoing programme of tests in live markets" to provide stores with more pricing options, but that no decision had been made to expand beyond trial stores.

Mr Meij stressed that the overall range had actually increased in size with the removal of the smaller, rectangular Chef's Best pizzas. "The testing is just making sure we don't compromise on quality and continue to operate in an environment where consumers get great quality in an inflationary environment," he said.

News Corp Australia

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