Domino’s Pizza Enterprises is set to close up to 20 stores in Australia, amid an announcement it will close up to 100 stores worldwide and exit the Denmark market entirely.
“Following a strategic review, Domino’s has made the decision to close a small number of corporate-owned stores with low average weekly sales to help build a stronger global network,” a Domino’s spokesperson said.
In the video above: Domino’s CEO Don Meij discusses success, in months before store closures.
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The closures are predominantly in Australia, Japan, France and Germany, they said.
Approximately a third, or up to 20 stores, are anticipated to be closed in Australia.
Domino’s will close all 27 Denmark locations, the chain announced on Tuesday, and 65 to 70 stores elsewhere worldwide.
The chain has a total of 913 corporate-owned stores around the world.
“We will work closely with the team members affected and expect to offer roles for them in neighbouring stores,” the spokesperson said.
“We also expect to be able to offer delivery customers a service from neighbouring stores where delivery distances allow.”
Domino’s Pizza will exit its loss-making operations in Denmark, where it has 27 stores. Credit: Dan Himbrechts/AAP
This comes as Domino’s Pizza Enterprises shares slid to their lowest level in nearly four years after the fast food giant said it had been unable to rebuild from a worrying drop in weekly delivery orders.
“Making the decision to close any store is a difficult one, but for these stores it is the right one,” group CEO and managing director Don Meij said.
“The investment and focus required is a drag on neighbouring stores and a distraction for the system.”
Domino’s had purchased its stores in Denmark in 2019 from the brand’s previous owners for the bargain price of 2.5 million euros ($A4 million) after a Danish TV show highlighted food-safety violations, poor working conditions and rat-infested kitchens that forced the company into receivership.
But while the new team there won back some customers with a focus on food safety and hygiene, ultimately the reputational damage from the previous ownership was too great to overcome, said Europe CEO Andre ten Wolde.
Domino’s also plans to shut its construction and supply arm in Australia and close its centralised dough-making commissaries in South-East Asia in favour of making dough in stores.
The various streamlining measures are expected to save the company an estimated $53 million to $59 million a year.
Earnings down 14 per cent
In February, Domino’s said its first-half earnings were down 14 per cent to $212.8 million, which Meij blamed on the company being too quick to pass on inflation to its customers, resulting in fewer orders.
“We are a volume business and less volume isn’t helping,” he said at the time.
Executives had pinned their hopes on a flexible digital voucher program hoping to lure customers onto the Domino’s platform, but second-half same-store sales through to June 4 were only up 0.2 per cent, compared with expectations of 3-6 per cent annual growth.
In contrast to his remarks from February, Meij was talking less about value and more about pizza quality and speedy delivery on Tuesday.
“We know pricing is an important part of the value equation for our customers, but so is the quality of the pizzas we deliver and the time in which they safely arrive,” he said.
“These are the answers to growing weekly sales volume and improving unit economics in the short term.”
At 1.35pm AEST on Tuesday, Domino’s Pizza Enterprise shares were down 7.1 per cent to $42.99, their lowest level since late 2019.
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