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If the recent performance of its share price is anything to go on, Domino’s Pizza Enterprises Ltd (ASX:DMP) looks to be on an increasingly stronger track, as its new CEO and managing director Mark van Dyck pushes focuses on value creation and improved efficiencies across the global brand.
On Friday, Domino’s shares shot up by more than 21% after the company announced it would be closing a total of 205 loss-making stores – the majority (172) of these in Japan – per a ‘comprehensive strategy review’ which in terms of that country alone, was expected to yield $15.5 million in estimated annualised savings from store closures and accelerated refranchising.
The group-wide review revolves around two main points: Achieving cost efficiency by simplifying the store network and cost base and strategic growth through a ‘value creation plan’ to push long-term value.
(This immediate regional focus will extend as far as France.)
This move is both a key step for van Dyke – who replaced longstanding chief Don Meiji in November 2024 – as well as a reflection of previous initiatives to boost Domino’s fortunes, including a strategic review launched in June 2023 which had prompted the closure of all 27 stores in Denmark by year’s end.
When Domino’s announced its final year results for the 2024 fiscal year, investors were informed the Danish closures had delivered the $12 million boost to EBIT (earnings before interest and taxes) which had been predicted.
The review launched in 2023 had also intended to “deliver material, near-term, cost savings, improving efficiency” through a reduction in Domino’s corporate store network – in which around 65 to 70 underperforming corporate-owned stores would be closed – plus an accelerated refranchising process.
As part of the latter, experienced franchisees would be brought in to facilitate the franchising of between 70 and 75 corporate stores earmarked as being in “turnaround.”
Taken together, the initiatives rolled out after this review ended up delivering $50.2M worth of savings for the company in FY24, in line with an expected savings range of between $50 million and $60 million.
The FY24 results also show the Australia/New Zealand market was the strongest across Domino’s portfolio, with a record underlying EBIT of $124.1 million (up 10.4% from the previous year).
Europe recorded EBIT growth of 338% (reaching $70.7M), leaving weaknesses in the Asian market, which was down by 28.7% (to $42.9M).
The latter was explained regarding external tensions, including geopolitical tensions surrounding Malaysia.
That said, Domino’s recent attention to Japan mainly sought to address the struggle of stores that had opened during the COVID-19 era – which had brought on a large number of sales – but had not maintained that momentum since the pandemic.
Of the stores to close in this country, 58 are franchised, and 114 are corporate, and are largely in sub-scale prefectures.
Mr van Dyke said these steps showed Domino’s was willing to act quickly to address areas of weakness. He said: “When I started in this role three months ago I said we would move decisively to reshape our business for long-term success.”
“Where change is required, we are acting quickly and transparently. Our priority remains clear—creating value for customers, franchise partners, and shareholders.”
At close, Domino’s traded at $35.82 – a rise of 20.93% since the market opened.
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